Many peo­ple look­ing for their first home or prop­er­ty have an in­com­plete pic­ture of what is ac­tu­al­ly re­quired to close the deal.

Miss Boodram, a lo­cal re­al es­tate ven­dor, said that while the price of prop­er­ties con­sis­tent­ly makes it dif­fi­cult for first-time buy­ers, of­ten clients come un­der­pre­pared for the process.

“The thing about it is they have a bud­get, and they need to un­der­stand their bud­get,” the ven­dor told the Busi­ness Guardian in a phone in­ter­view.

“Now, clients come to you, and we have had this quite of­ten, where you ask them if they are pre-ap­proved? And they will tell you, yes, they are pre-ap­proved. And when they come, they have a bud­get of prob­a­bly $1 mil­lion and com­ing to look at a home that’s val­ued at $2 mil­lion. So they would come in, they would look at these things, know­ing ful­ly well that it can’t be af­ford­ed be­cause it’s nowhere with­in their bud­get.”

Rhon­da Joseph-Wal­ters, Re­pub­lic Bank’s re­gion­al man­ag­er (north), ex­plained that this was in­deed a com­mon mis­take made by first-time buy­ers, as in many cas­es, those seek­ing their first home don’t even get pre-ap­proval.

“I would say that some of the mis­takes are as a re­sult of a lack of in­for­ma­tion and knowl­edge, ba­si­cal­ly. And I would not say what the mis­takes are, but gen­er­al­ly, in the ab­sence of the rel­e­vant in­for­ma­tion, you would make mis­takes,” said Joseph-Wal­ters.

“They don’t get pre-ap­proved, but they are go­ing to look for a prop­er­ty. So many first-time home buy­ers have no idea what they qual­i­fy for, okay, right? That is ab­solute­ly nec­es­sary. I mean, every­body wants the best house in the best lo­ca­tion, and the best house in the best lo­ca­tion is mil­lions of dol­lars. How­ev­er, your salary, or your in­come, could on­ly qual­i­fy you for X or Y.”

She said pre-qual­i­fi­ca­tion pro­vides a mort­gage cer­tifi­cate, which re­as­sures sell­ers and re­al­tors about the buy­er’s fi­nan­cial ca­pa­bil­i­ty.

How­ev­er, be­yond pre-qual­i­fi­ca­tion, she ex­plained that it is al­so im­por­tant for prospec­tive buy­ers to have sig­nif­i­cant sav­ings de­spite the op­tion to get 100 per cent fi­nanc­ing from the bank.

“Sav­ings are im­por­tant. Sav­ings be­cause there are a lot of as­so­ci­at­ed costs with a mort­gage. And yes, one we do, ac­tu­al­ly, give up to 100 per cent fi­nanc­ing. I don’t want to get too tech­ni­cal. The less you bor­row, the in­ter­est rate will be less. Of course, the in­ter­est pay­ment with 100 per cent fi­nanc­ing will be high­er than if you bor­row 90 per cent or 80 per cent,” Joseph-Wal­ters said, adding that man­ag­ing your cred­it his­to­ry is al­so im­por­tant to se­cure the bank’s ap­proval.

The ven­dor, who al­so buys prop­er­ties, how­ev­er, could re­late to some of the chal­lenges raised by prospec­tive buy­ers in the Busi­ness Guardian’s re­port ‘Young pro­fes­sion­als face hard house hunt­ing,’ pub­lished in the Sep­tem­ber 18 edi­tion of the Busi­ness Guardian.

She not­ed that she, too, had seen dis­crep­an­cies with val­u­a­tions but urged buy­ers to use val­u­a­tors list­ed with lo­cal banks to avoid some of these is­sues.

“Some­times I go to pur­chase a prop­er­ty and they give me an RICS Roy­al In­sti­tute of Char­tered Sur­vey­ors) board val­u­a­tor, and re­al­ly and tru­ly, the prices are way high­er than what we would ex­pect it to be. And when we do the cur­rent val­u­a­tion (via the bank), it comes down pret­ty much,” she said.

She ex­plained that younger buy­ers al­so need­ed to curb their ini­tial ex­pec­ta­tions and un­der­stand their in­vest­ment in a small­er prop­er­ty could be a step to­ward own­ing a larg­er prop­er­ty in the long run.

“I al­ways try to tell peo­ple, not every­body is lucky enough to start with the dream home. You would know that even from par­ents go­ing to grand­par­ents, it wasn’t prob­a­bly the big up­stairs hous­es that they now have. Every­body would have start­ed at some point and build piece by piece to get to the point that they want,” she said.

“You can’t im­me­di­ate­ly ex­pect to have the mul­ti-storey, ful­ly air-con­di­tioned, four-bed­room, mar­ble-tiled bath­room, but you can work to it,” she said.

Joseph-Wal­ters al­so echoed this point, not­ing that young pro­fes­sion­als could con­sid­er “white box” prop­er­ties be­ing of­fered by de­vel­op­ers, which are hous­es that are com­plete enough in struc­ture to get the nec­es­sary ap­provals but still re­quire fin­ish­ing.

“I think peo­ple just need to en­gage in the process a lit­tle bit more, be­cause maybe it’s not in the area that they want. I’m not talk­ing about what is con­sid­ered safe places. But then again, every­body has their own per­son­al taste, and some peo­ple would want to live in cer­tain ar­eas, and some would not, but what we have found some of the de­vel­op­ers are do­ing is that they’re build­ing some­thing called a white box,” she said.

“It’s not a com­plete home, but it’s com­plete enough to get your com­ple­tion cer­tifi­cate, but prob­a­bly some of the fin­ish­es are left up to the buy­er. So you’re get­ting an al­most com­plete house. So that re­duces the price, and there­fore, you can put in your own fin­ish­es ac­cord­ing to your own taste. So some­times they would not do a full cup­board in the kitchen and that sort of thing. So you’re get­ting a prop­er­ty, you’re able to buy a prop­er­ty, and some of them are ac­tu­al­ly with­in that $1 mil­lion. But again, be­cause if they were to com­plete­ly fin­ish it, it may go above your price point.”

Both stressed that while this may not be the ready-made so­lu­tion, it is a valu­able in­vest­ment in the long run.

“When I start­ed off, my first prop­er­ty sold for $1.2 mil­lion, 15 years ago, and that was a three-bed­room, one toi­let and bath. Not a bad lo­ca­tion in the cen­tral area. That same prop­er­ty now, 15 years lat­er, may be worth prob­a­bly about $1.8 mil­lion,” she said. “Prop­er­ties don’t de­pre­ci­ate. It on­ly ap­pre­ci­ates more.”

Buy­ers were al­so ad­vised to be aware that there were costs be­yond the mort­gage re­lat­ed to the process, and this too had to be fac­tored in­to the process.

“What you would want to en­sure is that you can cov­er all re­lat­ed ex­pens­es, be­cause you have the mort­gage pay­ment, but you al­so have to pay for val­u­a­tion re­ports. You have life in­sur­ance, which is re­quired. We got away from prop­er­ty tax for now, but that’s al­so some­thing to take in­to con­sid­er­a­tion, life in­sur­ance, or fire and con­tent in­sur­ance,” said Joseph-Wal­ters.

The ven­dor al­so not­ed that many did not con­sid­er hir­ing a re­al es­tate at­tor­ney, which is re­quired to com­plete such deals. Both the ven­dor and Joseph-Wal­ters ex­plained that lawyers with ex­per­tise are list­ed by banks as well to aid with the process.

“Be­cause it’s a le­gal process. Re­mem­ber, there are so many le­gal im­pli­ca­tions, and the whole process is a le­gal one, where you have to do these deeds of mort­gages, deeds of con­veyance, that sort of thing. So ob­vi­ous­ly the at­tor­neys are in­volved, and they are the ones who are re­spon­si­ble for en­sur­ing that every­thing, all the I’s are dot­ted, the T’s are crossed,” she added, ex­plain­ing that there are mort­gage spe­cial­ists and busi­ness de­vel­op­ment of­fi­cers across T&T, with re­al es­tate lawyers list­ed on Re­pub­lic’s web­site along with oth­er de­tails on the mort­gage process, in­clud­ing doc­u­ments need­ed, FAQs, and a mort­gage cal­cu­la­tor.