We’ve seen tons of articles online about the various mistakes that newbies in the property market commit as they search or apply for their first home; whether an HDB flat or private property.
Amid so many “don’ts” and negative examples, we decided it’s more useful to positively state what you should do if you’re a first-time homebuyer. Here are several best practices that every new homebuyer should apply as you plan for your first property purchase.
1. Set Clear, Detailed Goals
“I want to buy a house” is not a goal—not enough of one, anyway. “I want to buy a BTO 4-room flat within three years with a maximum budget of $300,000, and pay off my home loan within 25 years,” is an example of a detailed goal.
Setting a clear and realistic goal that is specific, measurable, achievable and has a fixed timeline helps keep you on target to achieve the house you want. If you’re searching for a house as part of a couple (as many new home buyers are), then this is all the more important, as each of you may have different goals and it’s important to align the two to prevent unhappiness further down the road.
2. Plan a Realistic Budget
Many people attempt to plan a budget for themselves—they take stock of how much they currently have and will have, and they figure for themselves how much a house might cost, how much a mortgage might cost, and how much they can afford each month. Some may even use our affordability calculator to help them do the math on their prospective property and their own finances.
However, many times, property seekers leave out important costs. Buying a house is not just property value, loan amounts and interest rates. It’s also the small little fees and not so little stamp duties that surround the big-ticket sums. It’s the costs of what you need to turn your house into a home, and keep it that way, after you purchase it—renovation, bills, installation charges, insurance, Town Council or condo fees, and so much more.
Many of these are recurring, and have a way of really mounting up in the long run—so you’d better keep them in view and prepare for them, even if it means the house you can actually afford may be a smaller or less lavish one.
You can use the 3-3-5 rule to govern your basic finances up to the point of purchase for maximum prudence: Your initial capital should be 30% of your target property’s value, your monthly mortgage payment should not exceed ⅓ of your monthly income, and the price of your property should not exceed 5 times your annual income.
3. Keep a Savings Buffer
Many first time homebuyers assume that their first home will burn all their savings, and have no issue putting all their cash into the downpayment—and some even plan the house they get based on how much downpayment they can afford, maxed out. But this is bad dealing for yourself.
A prudent home buyer keeps a savings buffer at all times, both before and after they buy their property. Before purchase, this savings buffer helps them pay for various fees and costs through the purchase period and beyond, as well as functioning as…well, savings, in case of rainy days.
After purchase, this buffer becomes an emergency reserve for rainy days in the future, to help cover things like mortgage instalments in the event of income disruption. To that end, it makes sense to keep a buffer amounting to at least 6 months’ costs for your house, mortgage and other debts.
4. Know Your Prices
If you’re looking for a resale market flat instead of a BTO, then you need to do your research into what a reasonable price for the area might be—and stick to your guns. One quick and easy way to check your area’s prices at a click would be here on PropertyGuru itself, where thousands of listings for every corner of Singapore can be found to give you a clear picture.
Given that the difference in the valuation versus the offer price of a flat can be 5 or even 6 digits, it’s important to hear all parties but also to have an idea of the value of a given flat yourself. Ensure that you know for yourself whether “you won’t find a better price in this area” for real, before committing to a purchase.
5. Carefully Consider Loan Packages
A loan isn’t “just” a loan. They differ in many respects and features from one to the other. A good practice to inculcate is to take care and time to look through various loan packages and understand for yourself which one best suits your particular profile and goals, and resist the urge to simply go with the first one that looks “okay”.
Take the time and start early, to gather information on various loan offerings and narrow down those that appeal to you. We’ve made comparing home loans in Singapore easy by compiling the best rates in a mortgage marketplace—make good use of this resource, and it could save you thousands of dollars, as well as hours of time.
6. Know When to Seek Advice
As a new home buyer, there may be much that you don’t know, simply because you haven’t had the time to read up on all of it yet. In such a case, it’s better to admit that there are many things you don’t know, and ask for help and advice from knowledgeable people, than to bull through based on your own limited knowledge and miss the smoking guns that could later shoot you in the back when you least expect it.
If you’re need help buying (or selling) a property, you can search for a real estate agent on PropertyGuru. If it’s guidance on home loans and financing, we recommend our PropertyGuru Finance Home Finance Advisors, who offer unbiased, personalised recommendations at absolutely no cost to you. Depending on how much assistance you need, whether it’s simple consultation or handholding through the entire process, they’re happy to help.
Do It Right
Don’t be one of those home buyers that get featured in “X Mistakes Homebuyers Make” articles. Do your due diligence, and seek an expert opinion to supplement your own understanding, to ensure that you get the best outcomes from your search for your very first home. It will help your finances to go further, and ensure you—and your significant other—will come out of the process happier and all the more ready to start your life together.
For more property news, resources and useful content like this article, check out PropertyGuru’s guides section.
Are you looking to buy a new home? Head to PropertyGuru to browse the top properties for sale in Singapore.
Already found a new home? Let PropertyGuru Finance’s home finance advisors help you with financing it.