Housing prices, especially in larger cities in Malaysia, are going through the roof. Many young people it difficult to own a house as they face financial challenges. However, if you’re financially ready to become a homeowner, the house-buying process itself can seem very intimidating.

In order to allay your fears, here’s a simple guide on how to begin your house buying process and come out roses at the end:

1. Deciding your budget

This sounds easy enough, but if you make a mistake on this step, the rest can be disastrous. Firstly, you have to sit down and decide how much of down payment you can pay. Usually, home buyers in Malaysia put down a 10% down payment on the house. You’ll need another 10% of the house price ( approximately) to pay legal fees, processing fees, insurance, and other miscellaneous costs.

This means you’ll need to prepare at least 20% of the house price before even starting to house hunt. Let’s say you have about RM 50,000 in your savings so you can put down about RM25,000 for a down payment. This means you should look for houses about RM 250,000 or lower. Many young people get some help from their parents or withdraw from their EPF account to fund this initial budget.

notebook orange calculator
Image credit: Unsplash

 

2. Starting the house hunting process

Usually, starting online is your best bet. It makes it easier to compare locations, prices, overall appearance and the like. Some of Malaysia’s most popular real estate sites include iProperty, Property Guru and Propwall. Most of the property you encounter will be handled by an agent. In some cases, the owners have put up the ads themselves.

Whatever the case, if you see something within your preferred budget and location, call the number and set up a viewing appointment. During the viewing:

  • Check the overall atmosphere of the house. Are the neighbors respectable? Are the surroundings clean? Is there a security system in place? Are the fixtures working? Is there any major damage that needs fixing?
  • Don’t go alone. Bring at least one other person along.
Two girls in empty house
Image credit: Unsplash

3. It’s time to get a loan

All banks in Malaysia offer housing loans and you’ll have to start researching and contacting banks on your own to ask how you should start the process. Your success at getting a loan depends on several factors.

  1. Your financing margin: This is the percentage of your house price being covered by the loan. Financing margins range from 70%-95% but there’s no legal minimum or maximum, just what you and the banks mutually agree to.
  2. Your debt service ratio (DSR): This is the proportion of your loan in relations to your income. The smaller your DRS, the higher your chances of getting the loan. Banks prefer your DSR to ideally be less than 70%. Here’s how your DRS is calculated:

DRS= (Total amount of loans* ÷ Nett income) x 100

*This includes any other personal loans, car loans or housing loans that you have including the loan that you will apply for

To secure a loan, you will have to provide several documents, including copies of your income tax declaration, pay slip, your CTOS or CCRIS reports and more. All these copies have to be certified true copies too.

Once a bank agrees to offer you a loan, you will have to sign legal documents with the bank through a lawyer and will have to foot the legal fees.

writing document
Image credit: Unsplash

4. Engaging a Lawyer

If you’re buying your house with an agent, it’s slightly easier. This is because your agent will usually help walk you through the process and recommend you a lawyer. Otherwise, you can always engage one independently if you know a good lawyer. From here on out, you only have to provide some necessary documents as requested by the lawyer. Your lawyer will deal with the owner’s lawyer and draw up a sales and purchase agreement (SPA).

Once you sign the SPA, the house is yours. Of course, you will now have to be a responsible homeowner and service your housing loans monthly to avoid problems.

Couple walking with flowers
Image credit: Unsplash

Your new home will need fixtures, furniture, bedding, appliances, and others. You can always buy them online and use our Shopback home and living vouchers full of cool deals and discounts.

*Featured Image Credits: Tina Dawson | Unsplash