Budget for the new house

The first thing that I consider when buying a house is the budget. What is the maximum price of a house that I can afford? This will need to consider all the rough estimation of the expenses that I need to produce to buy and service the house that you are interested in.

When buying a new house, the developer will request that you pay a certain amount of down payment, typically 10% of the house price. Hence, this should be your first step to measure your financial standing, whether you are able to produce the money down payment or not. You should take a look at your saving accounts, or maybe EPF/KWSP account 2 balance and figure out whether you will be able to cough up the down payment.

The second step, I then went to a couple of bank, asking the rough estimation of how much the monthly installment will be for the loan that I had in mind. Specifically the rough figure of how much of a loan that I probably need (house price - down payment).

During my visit to the bank, I also asked the officer to evaluate on how much is the maximum limit that I might possibly borrow from the bank. The bank officer requested information of my monthly and annual income, as well as my liabilities (car loan, personal loan, credit cards ... etc). From that information, the bank officer was be able to advise my borrowing maximum limit (well .... roughly of course, just for my initial kick-off for my financial analysis). And the bank officer will also be able to advise on the monthly installment for that maximum borrowing limit (based on how many years that you want to service the loans)


Based on the above information, which are:

1) The maximum loan that I can achieve;
2) My savings account balance;
3) My KWSP account 2 balance;
4) Downpayment for the house;
5) Monthly payment for house loan that I have in mind;
6) My current fix monthly commitment (car loan, scholarship loan etc)
7) My monthly spending (food, fuel, bills ... etc)
8) My monthly salary.
9) Others (savings, entertainment allocation ...etc)

I then make a simple calculations, just to have an idea to see whether with my current financial standings, what is the maximum price of a house that in my capacity to buy. If the monthly commitment is too much to bear, I then repeat the steps above for a lower house price and check again my monthly incomes and commitments. Once I obtain an estimation of how much is the maximum house price that I'm able to purchase, the next stage begins ..... which is the house hunting!!!