The Ultimate Guide To Buying Your First Home within 24 months

Have you been thinking about buying your first home in Nigeria but need help figuring out where to start? I am here to tell you to relax. This step-by-step guide will walk you through the entire process from start to finish. We will cover things like sorting out your finances, finding the right properties, finding the right financing and finally closing the deal.

This is meant to be a practical guide and if you follow it step by step, you will be able to own your home in less time than you planned.

Step 1: Review your financial Status

If you are like most people, you will need a mortgage or some other type of housing financing in order to be able to afford to buy the home. And in order to get this, any lender wants to know 2 things;

• Your ability to pay back

• Your willingness to pay back

For them to determine this, they need to see your credit score and that you have a downpayment. They will also need to see things like your debt-to-income ratio (see below), and other indications of credibility.

Your goal here is to determine how much of a loan you will need. Note that you can only access a loan of up to 90% of the property, for example if the home costs N10,000,000 the maximum loan you can access for that property is N9,000,000.

What are you reviewing ?

• Check your monthly income

• Check your monthly expenses

• Check for any debts you still need to pay back

How do you prove the “ability to pay back”?

Any responsible and legitimate lender needs to ensure that the loan is not an undue burden to you. A good rule of thumb is to calculate your housing expenses and make sure they are not more than 30-40% of your monthly income.

You also need to have at least 20-30% of the cost of the home you want to buy. This helps to show financial stability and responsibility. Lenders use this to determine if you have the ability to pay back the loan.

How do you prove “willingness to pay back”?

This strays into the realm of behavioural science. The lender needs to understand if you are the kind of person who will pay back the loan once you have the money. In order to do this, they rely on your credit report which includes your score and credit history.

In order to understand how your credit score works and which of your activities impact your credit score the most, click here

In summary;

Here’s how credit scores are evaluated;

• Excellent: 800 to 850

• Very Good: 740 to 799

• Good: 670 to 739

• Fair: 580 to 669

• Poor: 300 to 579

• Est Duration: 2 days

Step 2: Find out how much you can borrow

Before you start viewing properties, find out how much you are eligible to borrow. This can vary wildly depending on factors such as your credit score, monthly income, and the number of working years you have left.

Just note that as I mentioned above,

To find this out, all you need to do is speak to the nearest mortgage company to you or better still take this test and get an instant result showing you what you can afford.

• Est Duration: 1 hour

Step 3: Save up for your deposit and other expenses

You can only borrow between 70-90% of the home value. For example, if you want to buy a home that costs N10,000,000 you will be expected to put up anything from N1,000,000 to N3,000,000 (Depending on the lender).

If you can put up more than that, it's better for your chances of qualification as well as could get you a lower rate.

How to save for your deposit

• Create dedicated savings account for this. This is very important to reduce the chances of you using the money for other things or even accidentally spending the money when you leave it in your regular bank account.

• Choose a locked high-yield savings account. To the point above, it might take 6-12 months or even longer to save the deposit, you want it to be in a safe account, but one you cannot just access anytime you like, you also want it to yield good interest for you to prevent it losing value to inflation but also to get some extra cash either in your pocket or towards the home purchase.

• Treat it like a bill. Do not forget that buying your home goes beyond just finding a place to live, it's also an investment since the value of the home will continue to increase. You could ensure that 10-20% of your monthly income goes directly into the special account and stays there.

• Est Duration: 3-18 months

Step 4: Start actively house hunting

Now you know how much of a loan you can afford, you know how much deposit you need and you are actively saving towards it. You can now start house hunting. There are a couple of credible ways you can search for the home you want;

• Visit property listing sights like Propertypro or Nigeria Property Center

• Talk to an agent or property broker

• Check out H28’s exclusive property deals etc

Any property you see has something called an “Asking price” which is the displayed price, i.e the price you get when you initially make inquiries about the property. Don't be afraid to bargain, understand that the seller is trying to get the best price that they possibly can for the property, you also need to be trying to get the best possible price that you can get.

• Est Duration: 1 month

Step 5: Apply for your mortgage

Technically, you can only apply for a mortgage when you find a property and have gotten an offer letter from the seller. Even the amount you are applying for is based on the amount stated in the offer letter.

Once you have all that secured, you can now start your mortgage application. Here are some of the documents you need to put together for your application;

• Proof of identity, such as your passport or driving licence, or National Identity Card

• Proof of your current address, like a utility bill, bank statement etc.

• Your last 3 payslips and proof of any other income. If you’re self-employed, you’ll need to provide at least 2 years’ worth of accounts.

• Proof of your deposit, such as a bank statement. If someone is giving you the deposit as a gift, you’ll need a letter from that person confirming this and declaring they don’t expect it to be paid back

• Once your mortgage is approved and the sale is complete, your bank will also need proof that you have buildings insurance

At this point, your lender will conduct credit checks and due diligence on all the provided documents. They will also examine the property you want to buy to ensure its worth they price you are paying for it.

After all this, you will get a notification that your application has been approved. It usually takes 3- 6 weeks for the entire process unless there's a problem with the application or any of the documents you have provided.

• Est Duration: 3 - 6 months

Buy Insurance

Every lender will expect you to have home insurance in order to be able to complete the process. It's a relatively simple process and most insurance companies offer a form of home insurance.

You might be expected to buy from a list of pre-approved providers however, just note that this a critical step and there's not much you can do to avoid buying homeowners insurance

Step 6: Close the deal, Move in

By this point, you are ready to close the deal by signing all the contracts. The funds are moved to the seller and you are handed the keys to your new home.

You can now move into the home and start making payments according to the schedule agreed on with the lender which could be monthly, quarterly, or annually.

• Est Duration: 1 momth

If you follow these steps closely, you will officially be a homeowner! And there you have it.

Reach out if you have any questions or need further clarification.