FAQs For First-Time Home Buyers

For first-time buyers, buying a house is one of the largest investments most individuals make in their lifetime and one that requires much thought and input. You can’t afford to make a wrong investment and acquire a property you wouldn’t give a second glance at!

If you’re like most people who make their first property investment, many questions flood your mind. Remember, there are no silly or dumb questions. Getting the right answers to these questions will contribute to you making a well-informed investment decision.

So, let’s delve into some of the questions brought up by first-time buyers.

Buying or renting

This is perhaps one of the questions that pop up in the mind of many potential first-time property investors across the board. The decision to buy or rent affects your financial health, personal goals, and overall lifestyle. Important to note is that the decision you make is pegged on your financial situation and the lifestyle you aspire to have or currently walk in. However, both require a degree of financial stability for payments and maintenance.

Some of the advantages of buying a house rather than renting are:

  • It provides a sense of security and freedom – Let’s get honest, knowing you must have rent every other month can get nerve-racking.
  • It provides a sense of pride – having a place of your own you can call home, where you are in charge of designing it to suit your personality is that icing needed to sweeten the taste of the cake.
  • Provides an opportunity to build on equity – equity in real estate is the probable value of the property minus the mortgage and all other expenses/debts incurred to acquire the house. As you pay your mortgage loan, equity on the house keeps increasing.
  • The value of land keeps appreciating, therefore, the return on investment of buying a house is guaranteed.
  • You could develop or flip the house in the short term and resell it at a much higher price.
  • If buying a property on its own land, you can build a servant quarter on it and earn some rent while living in the main house.
  • Increased financial gains – As the value of property increases, so does the rent. 

Am I ready?

For first-time buyers, check your readiness by asking certain questions:

  • Do I have a stable job?
  • Do I have a steady income? If not, are there alternative income options?
  • How reliable is my source of income for the foreseeable future?
  • Do I have any outstanding bank loans/ debts?
  • Do I have income saved for a down payment?
  • Can I manage to pay off my mortgage, insurance, utilities, and taxes? The general rule of the thumb, your mortgage should not take more than 25 – 30% of your next income.

You can use the answers to the above questions as a yardstick to determine if this is the right move for you now or if you need to make some adjustment and postpone it to the future. However, if you can afford to spend a maximum of 30% to pay off your loan, then you’re good to go. 

What’s the duration taken to purchase a house?

The answer to this question is not set in stone as several factors affect how fast or slow your home acquisition process will be. However, certain underlying principles apply. After you have seen the house you desire and settled on the pricing, it can take 30-45 days to process your loan and process papers for homeownership transfer. Therefore, closing in on a house can tentatively take 1 to 2 months.

How much will I need for a down payment?

One of the greatest hurdles for first-time buyers is the down payment. Realtors will require a down payment of between 5-20%. The percentage may vary based on the mortgage specifications and the lender’s requirements. Ensure you make a savings plan and stick to it. Sacrifice goes a long way in ensuring you achieve the goal.

How do I get the best mortgage?

Once you get your dream house, it’s painstaking going through the various terms and mortgage rates. However, you can do your homework beforehand by:

  • Consulting with your preferred bank
  • Also, if your job offers mortgages for its employees, look at the offer and do a comparative analysis.
  • Consult with someone skilled in the field.

Do SACCOs offer better deals?

One of the ways to get your dream house is to save with Saccos for a period of up to 5years to qualify for a mortgage loan. In Kenya, Sacco’s offers the best mortgage loans with low-interest rates and a more extended repayment period.

Let’s say you’ve opened a Sacco account and are saving Ksh. 5,000 monthly, your annual savings will sum up to Ksh. 60,000. The accumulated amount of this in five years is Ksh. 300, 000, and the better part, you can acquire a mortgage loan five times your savings. That’s a 1.5M mortgage loan at a very low-interest rate.

Some of the Sacco’s to consider that offer the best deals are:

  • Harambee Sacco – Harambee Sacco offers mortgage loans at a very subsidized interest rate of 7%. If you save up with this Sacco, you can get a loan ranging from KS. 500k – 4M. The repayment period is up to 25years.
  • Safaricom Sacco – for this Sacco, you must save up for one year to acquire a mortgage loan that sums up to five times your savings. The interest rate is 8% per annum on the reducing balance with a repayment period of up to 25years depending on the mortgage loan.  Noteworthy is that the minimum amount of mortgage loan you can get is 3M and the maximum 8M.
  • Police Sacco – Police Sacco finances its members with loans to either purchase a house or construct one. The interest rate is 9% with a repayment period of up to 20years. The maximum amount of loan you can get is 4M.

As we land this plane, research is paramount in investing in property. Get your facts right, save up and look for the property that best suits you. Remember, there are no silly or dumb questions. Asking the right questions will help you make an informed decision which is the first step in landing that dream house.

If you need to consult, we are available to advise.

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