Your heart is set on home ownership. You’ve weighed the pros and cons and are ready to find the perfect home. Where do you start?
Buying your first home can be an overwhelming process, so we’ve designed this handy checklist to help you tackle the task.
We even put it in order so you know what to do first. We like to make everything easy for you.
First Home Buyer’s Checklist
Make sure you’re in the right KiwiSaver fund
You might be eyeing up your KiwiSaver balance to go towards the deposit, so you want to make sure you aren’t at risk of a sudden balance drop.
Higher risk (growth) funds can result in greater growth over time, but the balance will fluctuate.
Lower risk (conservative) funds are relatively steady, so if you’re planning on buying a home in the near future this is your best bet.
BetterSaver’s fund finder quiz can help you take into account your personal situation and make sure you’re in the best KiwiSaver fund for you.
Check to see if you are eligible to use your KiwiSaver for a First Home Withdrawal
The following criteria must be met to be able to withdraw your KiwiSaver earnings to use towards your first home deposit:
- You must have been a contributing member for at least three years
- You have to intend on living in the home for at least 6 months
- The house you purchase must be in New Zealand
- It must be your first time owning a property (although there are criteria that can qualify you if you have owned a property in the past)
- It must be your first time withdrawing funds from your KiwiSaver, and
- You must leave $1,000 in your KiwiSaver account.
Let your bank or mortgage broker know you want to use your KiwiSaver balance
You will have to go to your KiwiSaver provider and request a First Home Buyer’s Letter. This can often be done through your provider’s website.
Find out what you can afford
There are 3 main areas to consider: the deposit, mortgage payments, and additional costs.
- Deposit: Banks generally require 20% of the purchase price as a deposit before they will give you a home loan. However, this can be as low as 5% with a First Home Loan. More on that in a minute.
- Mortgage payments: You can use a handy mortgage calculator to estimate what your payments will be. Bear in mind that unless you have a fixed-rate mortgage, interest rates can change which will affect your payment amount. Also, make sure you know the details of your mortgage loan.
- Additional costs:
- Property inspection to assure your potential home meets NZ building standards.
- Land and Information Memorandum from the council that shows zoning, resources consents, natural features and any planned developments.
- Property lawyer to help you digest the legal stuff.
- Savings to cover rates, insurance and maintenance.
Find out what other help you qualify for
You may qualify to receive a KiwiSaver First Home Grant or First Home Loan.
This provides money that you don’t have to pay back - between $3,000 and $10,000 depending on your circumstances.
To qualify:
- You must have contributed a minimum contribution of 3% of your earnings to your KiwiSaver for at least three years
- The house you purchase has to meet a price cap, which varies region-to-region
- You have to fall under the income cap of $95,000 or less before tax for a single buyer or $150,000 for 2 or more buyers
- You must have at least 5% for a deposit
- You have to live in the house for at least 6 months
If you qualify for a First Home Loan, your required deposit could be as little as 5%.
To qualify:
- The house you purchase has to meet a price cap, which varies region-to-region
- You have to fall under the income cap of $95,000 or less before tax for a single buyer or $150,000 for 2 or more buyers
- You must have at least 5% for a deposit
- You have to live in the house for at least 6 months
- You are a New Zealand citizen or permanent New Zealand resident or a resident visa holder who is ordinarily resident in New Zealand
You have to meet additional lending criteria set by your bank
Get pre-approved financing
Talk to your bank or mortgage broker to get pre-approved for a loan amount. This makes things easier because you can then bid on auctions with confidence, and keep your focus on houses that are realistically within your reach.
By the way, do you need a mortgage broker? A broker has relationships with multiple lenders so they have the ability to shop around for competitive rates. Also they can provide you with expert advice. Worth looking into.
Join the house hunt
Go to open homes and ask lots of questions. Make sure you’re aware of the property boundaries, zoning restrictions and any past maintenance issues or damages. Has the house been altered, and are all alterations permitted and certified? (You don’t want to inherit someone else’s problem.) Also ask about what chattels are included - that’s removable items like the stove, refrigerator, curtains, and light fixtures.
Make an offer
Once you’re sure you’ve found the right home, put your offer in. Offers can be conditional or unconditional. A conditional offer means there are conditions attached, such as a pending building report or finance matter. Unconditional means you are offering to buy it as it is set in the contract (offers at auction are only unconditional).
Sign the Sale and Purchase Agreement
After clearing it with your lawyer.
Request a First Home Purchase Withdrawal form from your KiwiSaver provider
Your KiwiSaver funds will then be transferred to your solicitor - make sure you allow enough time for this to happen BEFORE the settlement date.
Celebrate
On the settlement date, the money is transferred and you officially own your home. You did it!
One last thing
There is one other area to address when it comes to buying a home: your credit.
You need a positive credit record, so pay your bills on time and don’t borrow more money than you can afford to repay. If you have a shady credit history, make sure you have at least three solid months of good credit history before applying for a home loan (and if you’re not sure, you can check your credit here). Along the same lines, if you have too much consumer debt you might not get a loan.
If you have student loans, they can impact the amount you can borrow. Paying these off first will be to your benefit as you’ll have more spending power to get a home you love.
Lastly, most lenders will want you to have been in your current job for over 90 days.
BetterSaver is here to make it simple
This checklist should clarify the home buying process and hopefully alleviate some of the stress. Check out our other easy tips for saving, budgeting and making sure you know where your money is invested.
With hard work and planning, home ownership is an achievable dream. We’re here to help you save better so you can get on track to reaching your goals.
Get early access to BetterSaver’s advice today to find the best KiwiSaver fund for you - the earlier you start, the more you’ll save.