First Home Buying - Lessons Learnt the Hard Way

As previously mentioned we are lucky enough to have purchased our first ever house!

We have yet to move in (any packing tips would be much appreciated) and are anxiously waiting for June 7th when we GET THE KEYS!

We had a bit of a long and tedious road getting to where we are now and I know we learnt a lot of lessons the hard way. So to save you the hassle I thought I might share a few little tips and tricks for first home buyers. I know everyone has a different experience but this is what we found worked best for us.

• Brokers are your friends. A broker gets paid commission from the bank you choose to get a mortgage with. So it is a win-win situation - you get the best deal on a mortgage, he/she has to work hard to make you happy if they want to get paid.
  Lesson learnt: Trying to fill in application forms yourself may be fun at first, but having to go back and forth and back again to each bank is time consuming and soul destroying. Find a broker and they will be your middle man. If the bank needs more paperwork, the broker will ask you for it. The hardest part is pre-approval, once your offer has been accepted then it is nearly all out of your hands.

• Pre-Approval is also your friend. Go to said broker and say you want to look at buying a house. He will ask a few quick questions to make sure you are in the right place financially and go from there.
  Paperwork you will need: 2 forms of photo ID - usually copies that have been certified by a JP
  - 3-6 months of bank statements for all accounts including credit cards. Handy tip - keep your accounts in the green for this whole time, it has been known for banks to refuse you if you go into overdraft.
  - A letter from your employer stating when you started and what your yearly earning are.
  -Different banks need different things but get organised and get a printer!

• Kiwisaver pros and cons - Kiwisaver has a couple of interesting ways of using your retirement money for a first home. The first way is that you can use your employers and your own contributions plus any interest earned to go towards the deposit of your house. This does not include the $1k Government kickstart or any Govt contributions. You can find out how much you can withdraw by logging into your online IRD account and clicking the Kiwisaver tab. This money is to go towards the deposit of the house but the catch is that it only gets paid out on settlement day (or up to 10 working days after) so when you pay the deposit when the house goes unconditional you will need a temporary overdraft from the bank to cover this amount.
  
  - The other way Kiwisaver helps is by partnering with Housing New Zealand to provide a First Home Deposit Subsidy. If you have been contributing to Kiwisaver for more than 3 years (read: 36 solid months) then you are probably eligable for a grant. You get $1000 for every year you have been CONTRIBUTING to Kiwisaver up to $5000. Per person. The catch here is that we got caught out because although we have had our Kiwisavers open for 3+ years, we have been studying and had odd jobs or casual jobs that we didn't contribute to Kiwisaver. When you go to do the form you have to cross reference a list of your Kiwisaver contributions with a list of your income and make sure it adds up to more than 36 months. Ours didn't :( PLUS that part is super headache inducing!!
  
• Research - As soon as you have decided that buying a house is the next Big Step in your life then go to as many open homes as you can. I am serious here. The more you look, the better idea you get for what a house is worth in the current market. We got our house valued after our offer was accepted and it was bang on what we paid for it. This is down to the research we did and what we thought the house was worth. It wasn't our max price, it was us being sensible and knowing what the limit was.

• Open Home Hints
  - Don't be afraid to put your details down with an agent, if you find a nice one they might be willing to let you know of any places that suit you before they are advertised.
  
  -Ask lots of questions - know your way around insurance claims, ask what sort of ballpark figure the vendors are after, ask what chattels are included.
  
  - Don't be afraid to open every door and examine everything. That is the point!
  
  - Have a debrief after and list the pros and cons of that specific property, what the max price you would pay for it would be and if there are any deal breakers (ie next to train tracks)
  
  It also helps to have a list of ideals you would like your first home to have. Keep in mind you aren't spending mega bucks so if you aren't keen on DIY then you might need to keep saving or downsize a bit.
  Our major ideals were that we wanted some land and we wanted a standalone house. We also wanted a garage or shed but that didn't quite happen but there is the opportunity for one.

•  Money in your Pocket - There are a few costs that appear once your offer is accepted that you need to be prepared for. You need to make sure you have enough money that is easily accessible (not in a trust fund etc) to pay for the below items. This money should not be included in the amount you have for your deposit.
  I recommend approx $3000
  
  - Builders report - $400-$800
  - Valuation (some banks require this) - $500-$600
  - Lawyers Fees (some banks put towards this as an incentive) - $1200 - $2000
  - Lease Break (1 weeks rent + GST generally)
  - Moving Costs ($50 - $1000+)
  
  Obviously every situation is different but I am mentioning this to save you from a giant shock when the invoices start arriving!

• Builders Report - This is a requirement to all house buyers. Not all builders are qualified or experienced enough to carry out this inspection as you need to get it signed off and approved by the bank, the lawyer, the insurance company and yourselves.
  You can get a variety of services for this report - starting from a basic package to a package where the builder does the inspection and quotes for all the work needed to get the building ship shape. This can be handy if you want to know how much you will need to fork out once the house is yours. Not so necessary if you have an amazing hubby like mine who can do most of it himself. It is also worth mantioning that the insurance company will not approve your application without your builders report so as soon as your offer is accepted get onto this ASAP. You usually have 10 working days to get the report and the insurance sorted but things are crazy right now, especially in Christchurch.


• Lease Breaking - Since this is your first home you are likely to be renting. The ideal situation is to have a periodic tenancy which you only have to give a few weeks notice. Unfortunately most property management companies have fixed term tenancies so unless you time things really well then you will have to break your lease.
  It seems that some companies do things differently but in my experience we are required to give written notice and pay 1 weeks rent + GST for an administration fee to get the house advertised again. You are also liable to keep paying rent until a new tenant is found. Lucky for us in Chch I am fairly certain that this will not be a problem.  

• Welcome Home Loan - This is a Government incentive scheme to aid people who have trouble coming up with a deposit for their first house. There is an income cap and a whole bunch of strict conditions but if you qualify then it may be worth your while! You only pay 15% deposit on the amount of the house over $200,000. This could mean no deposit!
  We have gone through this scheme and have had ups and downs. I recommend going through a broker familiar with the process, having a good lawyer also familiar with the process and making sure you extend the finance condition on your offer from 10 working days to 15 working days.

Information Overload? Sorry about that. I would love it if this information helps in any way, any stress saver is a good one right?

Please, please keep in mind that all this information is from our own experience and may not be completely accurate forever.Some things I am still a bit hazy over but I think the basics are there. If you have any questions feel free to email me at amyliz80 (at) hotmail (dot) com.

Good luck house hunting!