Options, Costs and Tips to Becoming a First Time Home Owner in Kenya

on September 15, 2022

Owning a house elicits different, ideas, emotions and thoughts in different people. The feeling of accomplishment tops it all though. You know you have accomplished a milestone when you no longer have to deal with a landlord, rent increases, problems with cleanliness and water shortages. Your own house is an investment that gives you total control and status.

First time home owners in kenya, cost, option, tips
First-time owners in Kenya

How much does a first house cost?

An increase in the middle-class and expatriate population has led to the sharp increase of residential property value. Hass Consult Limited did a composite property sales index in 2016. This is a measure of residential property asking prices.

The above index was based on 4,000 to 6,000 Kenyan properties tracked across the country. They collected information from estate agencies and house sales that are publicly available on property websites, national media, and property magazines. Residential property that was valued at Kshs 7.1 million in 2000, was now valued at Kshs 31.1 million.

There are different options you can consider though depending on your budget and location. Houses located in Lavington, Karen, Muthaiga, and Runda will retail at a higher price compared to houses in maybe Ruiru, Juja, and Kiambu.

Options available when buying a first home

There is a process of buying a house in Kenya and several options are available. They include:

  1. Cash payment

It’s the best method to own a home but one needs to have a healthy savings account. If you pay in cash, you don’t have to worry about failed loan payments or repossession of property. You also get to buy the house you like.

  1. Mortgages

In recent years financiers have come up with innovative ways to help you own your first house. There are the KCB mortgages and home loans, the Housing Finance Ezesha Mortgage and many more. Some companies also help negotiate mortgage plans with these institutions for their employees. If you decide to take a mortgage consider the interest rates. It’s also in your best interest if you shop for the mortgage before you can decide on the property you want to buy.

According to WikiHow, this allows you to know how much you can borrow before buying a house. You may find a beautiful home that you instantly fall in love with only to find that you can’t afford it. You may not also find a suitable mortgage that covers the cost. Shopping for a mortgage first helps you tell if the house is in your price range or not.

  1. Taking home loans

Most financial institutions provide home loans to their customers depending on their savings. Some like the KCB/Sacco offer their customers up to ten times their total savings. To be eligible for a loan, you have to be credit worthy. If you have a history of bad debts and failed payments, the bank may not be willing to extend you a loan.

First home buying tips in Kenya

By this stage, you have dealt with the cash problem and are ready to go. To get value for your money though, here are things to look out for when purchasing your first house.

  1. Find a genuine agent

The Consumer Federation of Kenya urges citizens to be vigilant and make sure that they get value for their money. Make sure that the agent you hire is genuine and registered. Do they have a track record? Are they offering a deal too good to be true? Do they have genuine documents? You want to make sure that the house you buy is not repossessed and that your money does not go down the drain. Make sure you see the house and confirm that it’s real before purchasing. Beware of agents looking to sell in a rush because they may be in a hurry to sell before the market crashes.

  1. Location

This is the most important. The location you choose for your house has to be ideal. Are there schools available for your kids? Are there essential services like shops and hospitals available? How accessible is the road from your house? Is there accessible public transport? You and your family should be comfortable and these essentials have to be close by for that to happen.

  1. Is it the right time to buy?

Your agent should be able to advise you on this. Should you buy immediately or will you get a better deal if you wait a little longer? Get advice from people in the real estate business.

  1. Security

No one wants to live in a neighborhood where a house is broken into every day. Is it secured? Is there a neighborhood watch system? Can you comfortably walk around the neighborhood at any time of day or night? Is parking space available and is it safe?

  1. Property value

Do not rush into buying a house without considering the property value. The value of your house may fall after some years if low-cost housing is included in the zone. You want to make sure that your home increases in value as the years go by so that if you decide to sell, you get good money.

  1. Get value for your money

Why do you need to own your house? Is it an investment or are you tired of the ever-rising cost of renting? If you plan to settle down or get the house as an investment, make sure it is worth the money you purchase it at. Make sure the house is in good condition and that the amenities are to your liking. Is there water and electricity connection? How do you pay for them; post-pay or prepay? Do you need an internet connection and is the house set up for it? Making sure the amenities are to your liking ensures that you do not have to spend money-doing renovations (Buyrentkenya).

  1. Financing it

Choose an option that best suits you. You may get a loan that covers deposits and other related home-buying costs or you may pay the deposit which would reduce your overall payments. Make sure that your budget allows you to pay monthly installments in time. Consider fluctuating interest rates too since they affect your installments.

  1. Get a good lawyer

Compared to the price of the house you want to buy, the cost of hiring a lawyer will be a drop in the ocean. The lawyer will make sure you are not scammed, that the seller holds up their end of the deal and ensure the documents to the house are genuine.

These tips will help you if you are a first-time homebuyer. As you shop for your first house, try to view as many options as possible. Do not get your sights set on one; it may have all that you need, but you may end up paying more due to emotional investment. The deal may not also go through and you should have the heart to walk away and look for other options. Make sure you see the house before buying to avoid buying those that are set to be auctioned. All the best as you become the next house owner.

6 Simple Step by Step Tips on How to Buy Your First Home

on April 5, 2021

Every individual harbors a dream of owning a home. You see, nobody enjoys dealing with annoying landlords and caretakers. Buying your first home will probably be one of the biggest financial investments you will ever make. Most first-time homeowners tend to make decisions based on their emotions when it comes to which type of house to buy. Even though this is right, never overlook the other important aspects.

Buying a first home steps
Buying a first home

Most first-time home buyers, don’t have any clue about the buying process. Don’t blame yourself, coz you’re not alone. These are some of the lessons that are not taught in school. We were told that experience is the best teacher, and this is where your experience is needed most. But worry not, I got your back.

Step by step to buying your first home

1.  Are you ready?

Having enough money is not enough reason to own a home. There is a myriad of other reasons to be considered. Some of these factors are;

  • Are you ready to settle down? – There is no logic behind you buying a home that you may be forced to sell in the two years’ time? What is the nature of your job? Does it require a lot of traveling and shifting? If your career involves shifting goalposts, then paying rent may still be the better option for you? Consider buying one if you have any intention of living in it for the foreseeable future.
  • Check your savings– Most people think that securing a mortgage is the only thing you need to own a home, but that’s not the case. There is a very important aspect, down payment. Have you saved enough to afford a down payment? And this should include all the other expenses that may come with it. First time home buyer down payment is probably the biggest investment you will be making in your life at this stage. You need to be mentally prepared for this.
  • What is your loan history? – Do you have any other loans you’re servicing? If you have taken a car loan or you are still paying your student loan then taking a house mortgage may be too big a burden to carry. Consider finishing paying up the other loans first. What is your credit score? Remember that the bank will calculate interest for your mortgage based on your credit score. Ensure you have a good favorable credit score.
  • Lastly, can you mend a broken door? – Part of the benefits that tenants enjoy is that help is always a call away. Have a leaking roof? Then call the landlord, he will send a plumber to fix it. But as a house owner, you will have to do such things on your own or pay someone do it on your behalf.

If your answer to all these questions is in the positive, then you are truly ready to own a home.

2. Get a Financial Partner

You need a mortgage pre-approval before owning your dream home. Take time and shop for the best mortgage lenders for first-time buyers. Remember that all lenders will offer you a loan based on your credit score. A credit score is a number that shows the likelihood of you paying back a loan. Work on your credit score before applying for a mortgage.

There are different loan types and loan payment options available in different banks and lenders out there. The questions that most potential first-time homebuyers ask are related to the type of mortgage loans available and the pros and cons of each.

You can seek the services of a professional mortgage broker who will look at the rates of different companies and choose the best first-time buyer mortgages for you for a fee.

As a borrower, you need to decide whether you want a fixed-rate mortgage loan or an adjustable-rate mortgage loan.

Fixed-rate mortgage loans have the same interest rate for the whole period of repayment. The size of your monthly payment will remain the same.

Adjustable-rate mortgage loans have an interest rate that will change from time to time depending on your agreement with the lender.

It’s important to note that a fixed-rate mortgage may always change because property taxes and insurance are always fluctuating.

There are several pros and cons to both fixed-rate mortgage loans and adjustable-rate mortgage loans. Ensure you understand all of them before committing.

Most lenders often have special offers for first-time homeowners’ loans. Be on the lookout for such offers.

3. Start shopping for a house

Only after you have been guaranteed a mortgage should you start looking for a house. This is the gist of the whole home buying process, do it wrong and you may regret the whole of your life.

Seek the services of a professional realtor who will carefully listen to your needs; the cost of the house, location, etc. and advice you accordingly about the current trends in real estate. A good realtor should offer you several different house options.

After getting a list of potential homes from the realtor, then ask for a home inspection. Here, it’s advisable to hire the services of an independent inspector who will point out issues like termites, poor roof, poor plumbing that may become an issue after purchasing it. You see no one wants to incur extra cost after buying their first home.

4. Make an offer

You have now identified a house and think you can make it your dream home. Then go for it, buddy. The next step is to make an offer to the buyer. Here you write a letter stating a list of expectations that you need to be addressed before committing to pay a stated amount.

After the offer is made, the seller decides if they want to accept it or make them make a counteroffer for the buyer.

A time will come when the seller will agree to sell the house subject to both parties meeting certain terms. And congratulation, your dream of owning a first home is almost becoming a reality.

5. Escrow period

This is the period between when the offer is accepted and the closing period. The closing period is the time when you purchase your dream property. The Escrow period is the time when all details are finalized. It may be very long or short depending on certain factors. A first home buyer should be very patient during this period.

These are some of the things that should be done during the Escrow period;

  • Securing the mortgage- Ensure all details related to the mortgage are finalized and the loan is ready.
  • Addressing all the contingencies raised during the time you were bargaining for the home property.
  • Re-inspecting the home to ensure it meets the irreducible minimums you had set as a buyer. In case the contingencies have not been addressed then you are free to walk out of the deal or renegotiate another price. The ball is always in your court.
  • Get insurance – You will need to start a homeowners’ insurance guide. Most lenders will demand that you are protected in case anything bad happens. This will also be used to figure out how much you will be paying each month.

6. Closing period

Once everything is in place, date of sale will be set. This is what is referred to as the closing period.

  • On this day, you will pay the realtors and title companies.
  • This is also the day you will sign all documents and homeownership will change hands.
  • Pay a one-year homeowners’ insurance plan.
  • Pay any other fee that you will be required to.

CONGRATULATIONS! You are now a first-time homeowner.

Mistakes that first-time homeowners make

They say we learn by making a mistake, but my principle is that you should always learn from other people’s mistakes. Having said that, here are some of the mistakes that may kill the dream of owning your first home.

  1. Taking another loan before the mortgage is approved – This may be suicidal and may jeopardize your plans. Most mortgages are always approved late. The lender may decide not to approve the mortgage if you take another loan. Never take a loan during this period. If you must take the loan, then seek advice from your mortgage broker.
  2. Most first-time buyers don’t understand what they are putting themselves into – Why do you want to buy a home? Buying because your friends are doing so is a big mistake, buying because you won some money for gambling is also a mistake. You should also understand that buying a home is not an investment. If this is the reason, then it will backfire.
  3. Not hiring a realtor- You may feel that realtors are just middlemen who want a share of your hard-earned cash. But bypassing them is suicidal. Professional realtors have an ethical code of conducts to uphold. Their main goal is to find you a first-time home without much struggle. They will ensure you don’t incur thousands of losses when the deal backfires. They will also give you market advice and future trends in real estate.
  4. Emotional buying – Do not buy a home because you love it because love affairs die very quickly. Consider the cost of the house and your future before buying it. Your emotions may lead you into buying an expensive house and then lack the funds to turn it into your dream home.
  5. Escaping property inspection – You may think that this is incurring extra cost, but property inspection is mandatory for any property owner. It will save you losses.
  6. Assuming that your property will appreciate – Your home is only worth what the market can pay for it