White picket fences, ample yard space, dedicated gaming room, parking area large enough to fit more than one car, and of course, the ultimate dream of any young working adult in Malaysia, a landed property!
If you’re thinking of buying your first property as a fresh graduate, we’re here to tell you that it is definitely possible. And while it will most certainly be challenging, the outcome of having your own place to call home is more than worth it in our eyes.
Here’s what you need to know when you are thinking of buying your first house as a fresh grad.
The Many, Many Challenges Buying A House As A Freshie
Realistically speaking, financing a home (regardless if it’s your first or your nth one) is one of the most financially challenging endeavours that you will face as a working adult. And as a fresh grad, this situation is exponentially more difficult to overcome. But it’s certainly not the end of the road for your dreams of owning a house in Malaysia.
Most fresh grads will face similar problems as other more seasoned home buyers when it comes to purchasing a new property i.e. saving up enough money for the down payment in addition to all other related costs. Plus, building creditworthiness to obtain a home loan is easier said than done especially as you’ve just left the comfort of your university life to enter the rat race.
Typically, down payments are usually 10% of the property’s price which you’ll need to pay upfront before you even start to repay the loans each month. For instance, if you’re shooting for a RM 500,000 property, the downpayment you are expected to pay would amount to RM 50,000. Not a small number by any means, but a doable one if you are consistently budgeting your monthly finances. Moreover, most banks will also want to know about your credit history. This means you’ll need a paper trail of stable income to supplement your application for a loan, which is usually at least 3 to 6 months’ worth of statements.
Knowing all of this, one of the best ways to immediately get a home loan approved upon graduation is if you’ve already been saving up and building good credit history throughout your uni life. This is certainly easier said than done. And for most fresh grads, you’ll need to buy yourself some time to get a job to boost your credit score.
Some factors which may affect home loan eligibility:
- Little to no credit repayment history
- Insufficient income to finance your chosen property
- Insufficient savings or EPF contributions
- Employment instability
- Unfavourable credit scores
As A Fresh Grad, Can I Apply For A Home Loan In Malaysia?
The short answer? Yes, you can. If you’ve managed to accrue enough funds as well as the credit score to back it up, then you’ll have a higher chance of obtaining a home loan.
That being said, you may still get a home loan even if you’re at the beginning stages of your career — with the caveat that you’ve held down your job with a decent monthly take-home income for at least three to six months.
One way of approaching financing a house as a fresh grad is via a joint home loan, which would allow you to leverage the credit strength of your co-loaner (typically a parent or partner) to boost purchasing power. Indeed, taking a joint loan with a parent/spouse/partner/sibling/friend with a more reliable income stream is massively beneficial in improving your chances of securing a home loan approval. Though the downside here is that if either party fails to hold up their side of the agreement, both loaners’ credit scores will be affected and may lead to a strained relationship.
Whichever path you take, the important thing is to do research on which strategy would fit you best as a fresh graduate. And speaking of research…
Research, Research, And more Research About A Property Before You Commit
Buying a house is a massive investment of time and money. Thus, as a fresh grade, it would bode you well to take all considerations into account when picking where you’d like to buy your new property.The first step then is to set a realistic picture for your own personal circumstance. Remember, being able to buy a house and being able to afford it are not one and the same.
Here’s a helpful rule. The 3-3-5 rule sets a basic guideline in order to make sure you’re not spending above your means:
- Rule 1: You should already have accumulated at least 30% of the property’s price.
- Rule 2: Your monthly loan repayment should ideally not be more than one-third of your salary.
- Rule 3: The price of your new house should not be more than five times your annual take-home income.
Keeping all three rules in mind when doing your research will allow you to keep a clearer and more rational mindset, instead of blindly buying into the hype that a real estate sales rep may provide. After all, they’re looking to sell the property one way or another. After closing the deal, you’re on your own for the most part.
Brand New or Sub-Sale?
Likewise, there is also the question of whether or not fresh grads should look into brand new developer units or opt for an already built, used home. Fresh grads may be tempted by in-progress developer units due to the early bird promos and discounts galore, but these kinds of properties are also commonly associated with higher risk and uncertainties.
On the other hand, sub-sale properties typically involve a larger upfront capital, though it may offer better rental yield and return on investment.
Knowing which kind of property is more well-suited to your lifestyle will be the key deciding factor on which type you’ll most likely buy as a fresh grad.
Questions You Should Always Ask Yourself As A Fresh Graduate, First-Time House Buyer
Now that you know the basics of what you should or shouldn’t do, here are some additional albeit important things to keep in mind before you put pen to paper on that home loan:
- Locality: Depending on where you plan to work and live in the long run, the kind of properties that you’ll be able to afford will also change.
- Debt/Budget: Income isn’t the be-all and end-all to measure your success in buying a house. Things like payment history, savings, amounts owed, credit mix, and the link will also influence how you should approach applying for a home loan.
- Affordability Vs Eligibility: Just because the bank has approved your loan, doesn’t mean you’ll have a smooth financing journey from thereon. As buying a house doesn’t only involve the down payment/monthly repayments, you’ll also need to take into account other associated fees like Sale and Purchase Agreement (SPA), legal fees, stamp duty fees, maintenance fees (if applicable), utility costs, renovation costs, furnishing, etc.
In short, the financial burden of buying a house isn’t something to be taken lightly, especially as you’re a freshie just entering the rather intimidating realm of working adults. Things like bills and credit card repayments can be daunting. Be prepared.