Process flow on acquisition of your dream house

Most of the people especially those who purchase their first dream house do not understand the whole process flow on propety acquisition. Normally we will set a budget for our dream house, get ready the 10% deposit, either engage the real estate agent or by themself to search for a few preferrable properties for evaluation, and lastly bargain with the vendor for better pricing after we decided on the property to purchase. The worth scenario for general public would be committed to the property purchase without any proper planning. I would like to emphasis here that I am not saying these steps/any decsion made by us are wrong.

To most of us our dream home could be the bigger investment in our entire life. For every investment that we choose it does come with its own associated risk, shouldn't we be more alert, rational and well prepared for the purchase/investment then. If you are thinking that the whole process are very troublesome and time consuming, I would suggest that you engage a reliable loan consultant to coordinate the whole process for you right from the day one.

In the following section, I would like to briefly list down the process flow, hopefully it will enlighten you:

1. Budget for your dream house
Setting the budget for your dream house with the maximum 90% loan amount and with 30 or 40 years loan tenure in mind. It is adviseable to utilise only the maximum of 30 - 35% of your monthly salary or income as your monthly loan repayment amount as the general guideline.

Example:
Your gross monthly salary: RM10,000.00
Calculate the 35% of your salary as loan repayment: 35% x RM10,000.00 = RM3,500.00
Deciding on the actual loan tenure you decide to undertake: 20 years
Calculating for the maximum of 90% of loan by assuming the interest rate fixed at 5%: RM530,000.00
The budget for your dream house: 530,000.00/90%= RM389,000.00.
Caculation for deposit & funding: RM389,000.00 x 15%=RM59,000.00

There is not fixed rule in setting the budget for your dream house. The above example is just a illustration of a more rational and systematic way of setting the budget for your dream house.

2. Conducting CCRIS and CTOS check.
Most of the people either they are not aware of or assumed that they record are clean. It would be a good practice to personally attend to the repective office to check for your credit record to ensure that your loan are not affected by these matter, which could resulted in forfeiting your booking fee/deposit paid to some parties.

3. Search & Identify your dream house.
I think I will skip this part. You will be more expert in identify your dream house.

4. Check for the market value of your dream house.
You normally would not know if the price quoted by the vendor or real estate agent are refecting the actual market value. Thus immediately after you have identify the unit to purchse you should engage a loan consultant to check and establish the market value for you. You should only confirm the deal with the vendor or real estate agent after you have secure the loan.

5. Getting mortgage loan.
Most of the people would like to secure the lowest interest rate for their mortgage loan, however, there are lots of banks offerring many different types of loan package, which they designed in such a way to cater to different people's need and requirement. Thus you should study carefully on each package offerred to you by the banks. If this is troublesome to you or you have no time to go through so many banks or you could not really understand what is the differences in the loan packages may be I would be a great help to you. Alternatively you could engage your own loan consultant to do it as well. Lastly signing on the Letter of offer from bank to confirm on your mortage loan. Bank will send the Letter of Instruction to loan lawyer

6. Confirm the deal with vendor
After you have secure the appropriate loan for your dream house, you could proceed to bargain with the venfor for better pricing and signing the letter of acceptance. You should take note on the term and condition writen on the document before you sign on it. Please check for the cooling off period to ensure it is written 21 days or 14 working day to avoid your 3% booking fee are being forfeited. If you have specific concern or term, you may write down on the letter of acceptance.

7. Engaging the Lawyer
After you have signed the Letter of acceptance, you should engage a S&P lawyer and Loan lawyer to help you to execute all the legal process, who are able to represent and work for your benefit throught out the process. As general guideline it would be good to engage the banker lawyer as both your S&P and Loan lawyer. Under this arrangement, your interest are better protected compare to you using the vendor lawyer. Hope you could realised the facts that banks interest will be always be taken care of no matter what happens.

Under the area of S&P lawyer:
8. S&P agreement stamping
Make sure you check through the draft S&P prepared by your lawyer and discuss what ever term and condition that are doubtly or not agreeable to you with your lawyer. After all the necessary amendment is done, both party will be signing on the S&P. You lawyer will then send the document for stamping, which would normally take 1 day.

9. Memorandum of Transfer sent to Stamp Office for adjudication of Stamp Duty
If the propery you purchse has the individual tile already then the Memorandum of Transfer (Form 14A) will be stamped to show that an adjudication fee of RM10 has been paid, and will then be returned to the purchaser's lawyers to hold, pending adjudication.

10. Property Inspection and Valuation
The Stamp Office will direct the district valuation department to value the property. Documentation shall include: - Memorandum of Transfer (14A) - Copy of the sale-purchase agreement - Copy of title deed - Form PDS5 (Stamping Proforma). The inspection is not mandatory to conclude the valuation and it is at the discretion of the valuation department, but in practice, it takes places in the majority of the cases.

11. Memorandum of Transfer (14A) sent to Stamp Office for stamping
The Stamp Office will issue a notice of assessment based on the valuation department's report. Stamp duty must then be paid to the Stamp Office, based on the Notice of Assessment, within fourteen (14) days from the date of such notice or the period indicated by the Collector of Stamp Duty. Usually the Collector will give thirty (30) days from the date of such notice to pay the stamp duty. This procedure may take one day if the purchaser or purchaser's lawyer goes personally. Otherwise it can take up to 5-7 days for the Memorandum of Transfer to be endorsed and be ready for collection. The documentation shall include: Form 14A (Memorandum of Transfer) Notice of Assessment (obtained in Procedure 3)

12. Registering at the Land Office/Registry
The purchaser's lawyer presents the duly stamped Memorandum of Transfer (Form 14A) for registration at the Land Office/Registry. This must be done within three months from the date of the Memorandum of Transfer (Form 14A) which is usually dated when it is submitted for adjudication. A title search is conducted just prior to presentation to ensure that there are no encumbrances or restraint against dealings which may hinder the registration of the Memorandum of Transfer (Form 14A). The real property gains tax (RPGT) at the rate of 5% on any gains, has been abolished on April 1, 2007. The documentation shall include: - Copies of Quit rent and Assessment receipts - Certified true copies of the Memorandum and Articles of Association, Form 24 (Return on Allotment of Shares), Form 49 (Return Giving Particulars in Register of Directors, Managers and Secretaries and Changes of Particulars) of the Purchaser and Vendor - Certified true copies of the Vendor's and Purchaser's board resolutions giving authority to sell and purchase the property respectively - Search report on the Purchaser as extracted from the Companies Commission of Malaysia - Duly stamped Memorandum of Transfer (Form 14A) - Copy of Notice of Assessment bearing Stamp Office's endorsement that ad valorem stamp duty has been paid (obtained in Procedure 3) - Original of the title document

Under the area of Loan Lawyer:
13. Lodgement of Private Caveat
This process is very much depend on your lawyer and bank requirement.

14. Borrowers sign Loan Agreement at lawyer's office
After the loan lawyer receive the documents from the bank, the lawyer will proceed to execute the legal process. Then they will contact you to sign the loan agreement at their office.

7. Purchaser's lawyer undertaking to let loan lawyer have transfer upon stamping
In this case is would be the same lawyer and no delay in days for document transfer.

8. Confirmation on the outstanding amount and disbursements.
The Vendor & your Solicitors will confirm the differential sum between loan and purchase price. At this point of time you have to prepare payment or fulfill the 10% deposit make payable to your lawyer. Follow by vendor's undertaking & vendor's redemption statement.

9. Advice partial drawdown & full drawdown
You lawyer will issue instructions to your bank for drawdowns. The vendor's bank will get its share first if applicable follow by the vendor being the last to receive what ever balance. Upon the partial drawdown or full drawdown, your lawyer will issue letter to you to start servicing your loan interest only or actual repayment amount.

Note: I am not study law nor related to any solicitator firms. I am presenting the above materials as to my best knowledge. I would appreciate if you could forward me the more appropriate details/update if you find any parts of the writing need to be amended.This definitely will be for the benefits of all readers.