Step 1: How much do I need / how much can I afford
Many future owners have a clear idea of what their house should look like. It should be spacious, have a large garden to host friends and family and have enough room to have family from abroad sleep over. But before you already buy furniture: you need to have a look at: is this dream affordable or will it stay a dream.
A rough calculation based on your net household income (Nettohaushaltseinkommen) and expenses (Ausgaben) should be done before going to a bank or a home loan consultant. This will give you an initial overview of your financial situation. This will be the basis for checking EMI (Annuität) options. Apart from the EMI, you also need to pay ancillary costs like land registry (Grunderwerbsteuer) , realtor (Makler), etc. The ancillary cost (Nebenkosten) amount to about 8-15% of the buying price (depending upon location and whether there’s a realtor involved).
Banks tend to ask for ancillary cost to be paid by the buyer out of his/her own pocket. There are exceptions though!
Getting to know how much loan you can get from a bank can be done here: Knowing your eligibility
Step 2: Financing Commitment
After getting in touch with your bank or better – with a home loan consultant – you should ask him for a financing commitment (Finanzierungszusage) for you, to be able to present it to the builder / realtor. This will not only make a good impression, but in some cases, you are not invited to visit the house if you cannot present such a document.
Step 3. Search House
There are multiple ways to search for a house – on and off the web. Sites likeimmobilienscout24.de,immowelt.de andKleinanzeigen.de (formerly ebay Kleinanzeigen) will cover 90-95% of available houses available on the web.
An important question is:do you want to buy a new house or do you prefer getting yourself an old house.
Better ways to get to a house are realtors in the region and direct contact with builders. Get yourself registered with the real estate agents in your area – what they usually do is pass on new properties to their existing database or clients. This way they can market themselves and also save a bit of money (on advertising)
Best though is word of mouth. Sellers who have not collated all documents or did not put in the effort of talking to a realtor are the best source, because you as a buyer will have less competition. Ask your friends and colleagues whether they know someone who is wanting to sell their house.
Get documents from the realtor / seller in order to see whether basic criteria are met: exact location, minutes of meetings of the home owner’s association (Eigentümerversammlungsprotokolle), land register (Grundbuch) and the economic plan (Wirtschaftsplan) are just a few which the realtor will have to hand out for you to make a sound decision.
While visiting the house, you will need to check a lot of things at the same time. Things to consider (amongst others) are:
- Location
- Infrastructure (public transport, internet speed, kindergarten, schooling, …)
- Neighbors
- Is it a rather loud apartment?
- Shortcomings (heating, electricity, roof, windows, …)
The key question is: can you imagine yourself living there for the next decade (at least).
Step 4: Finalize With Realtor/Seller
If all is fine, you can finalize with the realtor/seller/builder. If you want to negotiate, please bear in mind to create a win-win situation and not just bargain on price. Don’t forget to factor in the renovation (painting, floor, etc.) or even the modernization (heating, roof, electricity), while finalizing your offer. This will also come into picture while speaking to the banks.
Some realtors might want you to sign a pre-agreement (Reservierungsbestätigung). This is not legally binding, but the realtor (most often) holds his word and does not market the property anymore. In Germany only contracts which are notarized are legally binding (for apartments, houses).
Step 5: Finalize Financing
Now that you know what you want to buy and know what it will cost as well, you can close the financing as well. Best is to have at least 2-3 banks make an offer – in order to get the best possible mix of low interest rate, flexibility, term and security. This task obviously can be outsourced to a home loan consultant who most often has access to hundreds of banks.
The better you prepare your documents, the faster the home loan consultant can get you an offer letter from the bank(s). This step is underestimated by a lot of first-time buyers and will consume a lot of time, if not done correctly.
Amongst others, following documents will be needed:
- ID,
- Last three payslips + payslip of Dec of last year,
- Tax declaration,
- Proof of own capital (for ancillary cost),
- General overview of the property,
- Land register,
- Land map (Flurkarte) and
- Layout (Grundriss)
Step 6: Notary
During the time the home loan consultant gets the bank offers, you can already choose a notary, get him to draft a contract and in alignment with the seller set a date for signing. You as the buyer chose the notary, as you will be paying him as well. If there are amendments to the draft, these need to be signed off by both sides before the signing date. At the notary meeting you will be walking through the contract (word by word – read by the notary) so that all parties have at least read through the contract once. The notary will inform authorities (Finanzamt, courts, etc.). Once you both sign the contract, you will be obliged to pay the buying price (once all prerequisites have been met).
Step 7: Payment
Once all authorities have given a go-ahead, the notary will inform you by letter that you may now pay the seller. Once you inform the bank and the fund is transferred, the house (is almost) yours. The moment you get the keys to your new home depends upon what you aligned in the contract and can range from „asap“ to „in x-amount of months“.
The time between first visit of the house and finally taking over the keys is a process which can take anywhere between four weeks and several months – depending upon how fast buyer & seller can come to an agreement, how fast you get financing in place and how long the court takes to change the land register.
Step 8: Paying Back The Loan
Depending on the loan contract you will now pay back the loan on a monthly basis. This, as well, depends upon what you negotiated with the bank. If you opted for a specific KfW loan, you can negotiate a 1-n years of not paying back the principal for that loan – but only pay interest. This would give you a bit of a breather – especially while you are still buying e.g. furniture for your new house.
If you fixed a 10-year contract, you will (most probably) need to re-finance (Anschlussfinanzierung) after that period and can start thinking about loan after about 9 years (either with a forward-loan or a regular home loan)
