Editor’s Note: This post was originally published in April 2020 and has been completely revamped and updated for accuracy and comprehensiveness.
Things are starting to look up for the property market and for home buyers. The new government announced its commitment and focus on economic recovery with initiatives such as expanding the financing guarantee fund SJKP (Skim Jaminan Kredit Perumahan) from RM3 billion to RM5 billion to help first-time home buyers to secure a loan, especially those with no fixed income. So there’s really no better time than now to start planning for the purchase of your next home. Here is a comprehensive step-by-step guide to walk you through every step of the process of buying a home in Malaysia!
Step 1: Identify your investment timeline
First-time home buyers are usually purchasing for their own stay even if they have plans to invest.
There are important factors to consider when deciding why you want to get a home. And it is important to make the distinction between your own stay and for the purpose of investing as the two might not align.
You might get a home that’s really near to a commercial area to attract young professionals to rent a room with you, but you might lose out on privacy with your family.
You would consider the following factors while making a decision to invest in a home:
- Rental yield
- Potential for price appreciation
- Freehold or leasehold
But when it comes to your own stay – you might think a lot about things like privacy, the location of the home to your workplace or your children’s school, the interior design of the home and the neighborhood.
So it’s vitally important to clearly understand what are the aspects you are willing to look past and what are some non-negotiables for your own stay before buying a home.
Step 2: Know your budget
The next most important step here that most people overlook until it’s too late is to evaluate your loan eligibility.
Too often, first-time home buyers make a decision about their home budget until it comes time to make the payment, and they realize that they couldn’t qualify for a loan of that amount.
That’s why it’s vitally important to know your loan eligibility when creating your budget.
A) Check your Central Credit Reference Information System (CCRIS) report
Obtain your CCRIS report from Bank Negara Malaysia to assess your credit score and history.
B) Evaluate your debt-to-income ratio
Calculate by dividing your monthly debt commitments by your monthly income. Ensure your ratio is below 60-70% to increase your chances of loan approval.
C) Determine your loan eligibility based on income and property value
Estimate the maximum loan amount you can obtain by considering the loan-to-value (LTV) ratio, which ranges from 70% to 90% in Malaysia. Take note of Malaysia’s tiered LTV policy for multiple property loans, which may affect your eligibility.
Step 3: Review property listings online
Now it’s time for the fun part, house-hunting!
There are two fast and simple ways you can go about it.
1. The Do-It-Yourself (DIY) approach
The first is by going the do-it-yourself (DIY) approach by visiting a property listing website like Ohmyhome.
Here, you can easily browse through numerous home listings tailored to your preferences. The convenience of online house hunting allows you to virtually view properties through photos and videos while gathering essential information on location, rooms, fixtures, and furnishings. By narrowing down your options online, you can save time and effort by physically viewing only the properties that truly meet your criteria.
2. Engaging a Super Agent from Ohmyhome
Alternatively, you can choose to engage a Super Agent who will be carefully selected based on your specific property needs. With the help of a professional, you can navigate the entire process smoothly, as your agent will assist with all necessary paperwork and keep you well-informed at every stage.
While you are browsing listings online, try to develop a clear picture of your ideal home so that you can effectively communicate your preferences to your agent. Remember that seeking professional guidance for such a significant life decision can be immensely beneficial.
Once you’ve shortlisted a few potential homes, it’s essential to either conduct a walk-through of each property or, if you’re unable to visit in person, request a video tour from an Ohmyhome agent. This way, you can make a confident, clear-minded decision about your future home
Step 4: Prepare the deposit and other expenses
Once you find your dream property, get ready to make an offer. Ensure that you have the deposit prepared so that you can present it to the seller as soon as they accept your offer. Legally, you’re only required to pay a 3% earnest deposit while awaiting your loan approval from the bank.
And there’s also great news for potential first-time home buyers: the government has recently announced a 75% exemption on stamp duty for homes priced between RM500,000 to RM1 million until December 31, 2023. This exemption allows you to save a significant amount of money. Additionally, the memorandum of transfer for houses priced at RM500,000 and below is 100% exempt from stamp duty until the end of 2025, providing even more savings for buyers.
The no-money-down misconception
There’s also a common misconception that No-Money-Down Schemes require no cash throughout the transaction but this is not true.
You should keep in mind during this whole process that there are extra costs. These include:
- Hiring a realtor and a lawyer
- Paying the stamp duty, which is a tax on legal documents such as the instrument of transfer and loan agreement when you purchase a property
You’ll still need cash to cover the booking fee, which is typically around 3% of the purchase price and serves as collateral. The balance deposit is due upon signing the Sales and Purchase Agreement, although some property owners may be willing to wait for disbursement. Additionally, you’ll need to pay your lawyer for the legal fee and stamp duty. After completing the purchase, you may receive a refund of the deposit paid from your EPF or 100% loan, but the lawyer’s fee and stamp duty will not be reimbursed.
Step 5: Hire a lawyer
Once your offer goes through, it’s time to get a lawyer. You might think it’s unnecessary and that you can handle the paperwork by yourself. While that’s possible, the documentation might be overwhelming. The documents that must be signed and filed include:
- Letter of offer/intent to purchase
- Sales and Purchase agreement SPA
- Memorandum of transfer
By having help from someone who understands the jargon, you will prevent yourself from signing false papers or making costly mistakes. It is often too late when people realize their SPA’s crucial importance until something goes wrong.
This is also why hiring the right property agent is essential. You’ll be able to tap into their vast experience and network of contacts to ensure you’re doing things the right way. They know every trick in the book and can connect you with the right representatives.
Note: It’s not a good idea to share a lawyer with the seller, as they will have the seller’s best interest at heart!
After your offer is accepted, you can save time here by applying for a bank loan while the lawyer goes through the paperwork.
The basic term loan is the choice of many because of its simplicity. The borrower is only asked to pay a fixed installment amount throughout the loan term. For more flexible loan options, the semi-flexi and full-flexi loans are great options. If you prefer an interest-free transaction, consider the Islamic loan.
Step 6: Collect the keys
With everything running smoothly, your deposit paid and the loan approved, you can look forward to the date specified in the Sales and Purchase Agreement (SPA).
This important milestone brings you one step closer to owning your new home Soon, you’ll be handed the keys to your new home. How exciting!
Looking for your next dream home? Find the perfect one with Ohmyhome
With an Ohmyhome Super Agent on your side, you can rest easy knowing that a seasoned professional is working tirelessly to ensure the best outcome for you.
Taking the stress out of buying a home by guiding you through the entire process, from house hunting to closing the deal. They’ll handle the complex paperwork and legal aspects, ensuring that everything goes smoothly and that you’re well-informed every step of the way.
Ready to connect with one of our Super Agents? Simply drop us a message on WhatsApp or via our Live Chat at the bottom right-hand corner of the screen to secure an appointment today. You can also call us at +60 16-299 1366 for more information. In the meantime, you can download our app from Play Store or App Store now!