Last Updated on 23/03/2023 by Steve Wanjie
How to overcome the challenges of buying a house is a question many potential homeowners struggle with.
Homeownership is the single most important investment you will ever make in your lifetime.
The reason is your immediate family.
You want to make sure your spouse and children have a safe roof over their heads.
That is the ultimate desire of a caring and responsible parent.
This article discusses the challenges of buying a house.
Then we look at possible solutions to home buying challenges.
It’s important to own a family home.
Challenges of buying a house in Kenya number 1: qualifying for a mortgage
Many potential homeowners around the world don’t qualify for house loans.
Reason:
Banks want to prove that you are able to repay or service a home loan.
Thus, access to financing is a huge obstacle to prospective house owners.
A solution to Qualifying for a Mortgage Challenge
a) Start saving
Open a savings account with a bank or Sacco.
Make regular monthly savings.
Take a small loan once in a while and repay it on or before the loan’s due time.
You don’t even have to use the borrowed money.
You could invest the borrowed money in a money market fund.
Take at least three loans and repeat the process.
When you take and repay a loan on time you build a high credit score with the credit bureau.
Banks check your credit score.
Again you will have created a good loan repayment history.
b) Increase your monthly income
You can look for a higher-paying job than the current one.
This has the effect of affording you the ability to save more.
You could create more income streams by starting a small business or freelancing.
Reason – lenders like to see a steady source of income and with the income streams you have they better feel about you.
c) Clear or reduce current debt
Lenders don’t like it when they find that you have other debts.
They think you are a good candidate for default because debt can overwhelm people with more than one.
It doesn’t matter if you have a good loan repayment history, they don’t like it.
Clear your old debts before you go for a home loan.
If you can’t clear then work to reduce it.
Credit, car, or student loans could be the cause of a mortgage denial.
Challenge number 2: raising the down payment
You will need to get a mortgage from your bank.
A mortgage is a home loan.
The recommended down payment for a home loan is 20% of the house value or price.
If the house buying price is 1,000,000 Kenya Shillings you need to put down 200,000 as a deposit.
Raising the deposit for a home loan is a challenge many people fail to overcome.
That is the main reason the majority of world citizens live in rented homes.
Not that people don’t make money. They do make money. But they lack the discipline to plan for homeownership.
The solution to Overcoming Home Down payment Challenge:
Determine how much money you can afford to save every month for a homeownership deposit. How do you determine that? Let’s assume you want to buy a house that will cost you 1,000,000 Kenya shillings.
If you would decide to raise the house deposit in one year how much money to save every month.
That is 200,000 divided by 12 months. That is equal to Kenya shillings 16,666.70 Kenya shillings.
If you chose to raise the house deposit in 2 years how much would you save every month?
That is 200,000 divided by 24 months. That is equal to Kenya shillings 8,333.33 per month.
Now you have your formula.
Whether you want to buy a house worth 5 or 20 million, that is how to determine the monthly amount to save.
Important Tip:
The down payment determines how much interest the bank will charge you. A deposit of less than 20% makes the interest charged high. If you pay a deposit of more than 20% the loan interest goes down (or the loan becomes cheaper.) Thus, make a big down payment than required to negotiate for a lower interest rate.
Challenges of buying a house in Kenya number 3: It’s hard to find a house you can afford
You have your favorite location but finding a house you could afford becomes hard.
The reason being it’s expensive.
For example – if your dream was to live at the Upper Hill in Nairobi you realize property value has skyrocketed.
A few years back you could find a 4 million house now it’s above 50 million.
Otherwise, it is always difficult to find a suitable property.
Solution:
Instead of buying a stand-alone family house which is expensive here are a few options.
a) Buy a multi-family Rental Property
This will allow you to become a landlord.
Landlords collect rent from their tenants on a monthly basis.
This is a sure way of repaying the loan through units rented to tenants.
Even your lender will love this idea.
You have a home, the unit you living in, and a property rental business.
b) Buy a House Outside your preferred area
House built in the outskirts is cheap compared to houses within the city perimeter.
These are new homes built using modern designs.
The beauty of buying in the outskirts is affordability.
You can buy cheap now and sell the same later at a higher value.
This will allow you to become a landlord. Landlords collect rent from their tenants on a monthly basis.
This is a sure way of repaying the loan through units rented to tenants.
Even your lender will love this idea.
You have a home, the unit you living in, and a property rental business.
Challenge Number 4: Upfront Mortgage Fees
When you are don’t have to pay a home loan deposit nobody tells you of mortgage upfront fees.
Here you are ready with your 20% deposit only to realize you needed to have close to 35% instead.
The extra 15% goes to meet upfront fees.
These fees include; mortgage booking fee, house valuation fee, mortgage account fee, etc.
Others are stamp duty, mortgage arrangement fee, mortgage closure fee, etc.
The solution to Upfront Mortgage Fees
Before you start your mortgage chasing ask your banker about these fees so you may raise them beforehand.
Make sure you will not encounter surprises when you are ready to apply.
Ask questions.
Know everything there is to know about a house loan beforehand.
Challenges of buying a house in Kenya number 5: buying a house off-plan Stress
Some private developers sell housing before they have started construction.
Thus, they are selling you a house plan, not the real thing.
So they ask you to pay in advance and wait for construction to take place.
Many potential homeowners have gone through this route.
Some got their dream houses but the majority lost their investment.
Why are off-plan housing schemes attractive to homeowners?
You don’t need to go to the bank to ask for a mortgage.
You pay the private developer the deposit.
Then you pay the balance in installments.
The solution to this risk:
Avoid off-plan housing deals.
They are stressful and the risk of losing your money is too high.
You might get the house but the end product is not what was in the plan.
Poor construction and finishing.
You could get sick.
Hence go buy an existing house.
It may be new or old but at least you can inspect it and make a decision.
Stay away.
Off-plan housing schemes are bad for your health and your money.
6. Challenges of buying a house in Kenya conclusion:
There it is.
Now you know the challenges of buying a house and how to overcome them.
Buying a house is an important investment.
You can imagine the pain people living in rented homes went through during COVID-19.
Coronavirus brought the point home in a very clear way – own your own home.
Otherwise, you are living life under the control of a man.
It is bad.
It is dehumanizing.
Work, plan, and buy your own house.
Thanks
Steve Wanjie – digital marketing specialist
Founder – Dijito Marketing
How to make money in real estate in Kenya
Hustler fund: How to benefit from government business loan tips
References:
First-time homebuyer loans, programs, and grants
House buying blunders to avoid
Steve Wanjie is a digital marketing specialist, SEO Expert, expert article writer, blogger, sex educationist, and businessman. He is the founder of Dijito Marketing and Laikipo.com. He works and lives in Nairobi Kenya.
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