5 THINGS TO CONSIDER - Before Buying A New Home

This article is extracted from Public Mutual's The Bulletin May '08 issue.

5 THINGS TO CONSIDER





Before Buying a New Home


1. Am I financially prepared to purchase a home?
Purchasing a house is a huge responsibility and you have to ensure that you are financially, physically and emotionally equipped to undertake the task. It is a big first step. Signs that you are ready include a steady income for over two years, a good record of paying your bills on time, and not having too many large, long-term debts.

iProp Realty Sdn Bhd director Victor Lim said while most banks would provide loans of up to 80 percent to 90 percent of the purchase price, it would be useful to have some money saved up for the down payment as well as additional expenses like property valuation and legal fees. "Purchasers would need to prepare at least 10 percent of the purchase price to be paid up during the signing of the sales and purchase agreement," he said. In addition, you should also reserve another 5 percent to 6 percent for stamp duty and lawyer fees. And apart from paying the monthly mortgage, you might also incur other costs such as renovation/remodeling, insurance and bills associated with the maintenance of the home, for instance, utility and telecommunications.

Deciding how much you can afford for a new home can be tricky, especially since you have to take into account the interest and costs associated with a mortgage. A financial advisor or your local bank representative can assist you to determine your home affordability according to your current income, total expenses, the amount of money you can put down, and the loan terms you qualify for.

iProp Realty's Lim said as long as the purchaser's monthly income or joint monthly income (for two or more applicants) has three times the monthly repayment amount, he or she would normally qualify for the loan. "However, income has to be supported by relevant documents and the applicant must not be 'blacklisted' by the bank for not regularly servicing previous loans," he added.



2. Which location should I opt for when purchasing a home?


When buying a home, it is imperative to live in a community that fits your lifestyle. Those looking for peace and quiet in a friendly environment might prefer a home in the suburbs, while those who enjoy the hustle and bustle of city life might find living in an urban area more appealing.

And in view of the increase in crime, homeowners are now more finicky about security and safety in a housing development in order to have peace of mind. In fact, gated and guarded housing estates and condominiums with several tiers of security are fast becoming popular and would usually command higher prices. "Developers have realised this need and would offer these features in their projects," said Lim, who expects this to become a de facto standard for all future housing developments.

Equally significant when selecting the perfect location is the proximity to available amenities such as the wet market, schools, the post office, shopping malls, hospitals and transportation options. Also find out how the traffic situation is like in the area and whether it would take you a long time to get to work. Taking these into consideration would not only make your stay in your new home a more enjoyable one, but also increase the property's resale value should you decide to sell it in the future.



3. What is the role of a real estate agent and how do I find a good one?



The role of a real estate or property agent is to guide you through the property buying process and helping you get the best deal possible. They would be able to assist you by giving you inside real estate and community information that can only strengthen or deter your decision to buy a home in a specific area.
Your property agent should typically be friendly, reliable and have the right credentials including a license, and an exclusive agreement with a broker. To determine if he or she is qualified, you can check with the Board of Valuers, Appraisers and Estate Agents Malaysia (www.lppeh.gov.my). "Alternatively, you can ask the agents about their experience and expertise in the field, as well as any available third party testimonials," Lim said.

Property agents also have an extensive knowledge of properties available in the market, which allows them to keep an eye for properties they know will meet your requirements. Therefore/the more specific you can be when consulting with a property agent, the better help they can be to you.


To find a good property agent, ask for referrals from trusted sources such as family, friends and co-workers. As they are working for you, stay in a dominating but pleasant position and reject offers to look at homes that are clearly not within your price range or preference.

4. What should I look out for in a home?

Home viewing is one of the most important things to do when it comes to shopping for a new home, and unless you are extremely fortunate, you will probably spend a fair amount of time visiting many houses in search of that perfect property. It is advisable to make your visit during the day, and if possible, bring someone along with you, preferably someone with a sharp eye to spot things that you may miss.

Lim said the viewing process usually involves inspecting the foundation as well as the condition of both the interior and exterior of the house to ensure the house is in good condition. "Knock on the floor and wall tiles to ensure they do not sound 'empty' and be on the lookout for leakages in the ceilings," he pointed out. For secondary properties priced below the market value, endeavour to find out whether the vendor is selling it due to problems such as plumbing, water damage, termites, soil problems, and mold.

You should also make sure the size and space of the home is adequate for your immediate and future use. This applies especially to newlyweds and young couples who have plans to start a family, and might be forced to search for a bigger home for extra rooms in the not-too-distant future.



5. Why and how I should insure my new home?

As your home is one of the largest financial investments you will make in this lifetime, it is vital that you take all the measures to protect it from any unforeseeable circumstances. Taking up a homeowner's insurance coverage can eliminate the financial risks involved with having to deal with these hazards. However, you must ensure that you are providing sufficient coverage to protect the value of everything you own in your home, and of course, the home itself.

Before committing to a policy, however, you should read and understand every bit of the policy, including the fine print. Yes, including the fine print. Ask any questions or raise your concerns with the insurer if necessary. One common mistake many homeowners make is not checking the policy details before signing the agreement, only to realise they are not covered for an ample amount or there are certain items they are not covered for.

"For landed properties, you would only need to insure the replacement costs of the building alone and not the actual purchase price of the home (which includes the land cost). That is because in the case of a fire, only your building will be burned down, but your land will remain intact," Lim explained.

When taking up a home insurance, you should first get an idea of how much your actual home is worth. You can do this by getting a valuation on the property or by working out how much it would cost to replace the home at current market prices. You also need to take an inventory of your belongings and keep it somewhere safe. This will enable you to put an approximate value on your possessions, and may also prove invaluable in the event that you need to make a claim.

You should also make sure the size and space of the home is adequate for your immediate and future use. This applies especially to newlyweds and young couples who have plans to start a family, and might be forced to search for a bigger home for extra rooms in the not-too-distant future.