First-time homebuyer’s guide

A first-time buyer’s guide, to help you on your journey to your first home.

Homes are not typically bought outright, let alone for first-time buyers. An apartment is usually bought as a home of its own, so this alone means that you need to take extra care with the project. Due diligence is important, especially when you’re a first-time homebuyer. There are many homes for sale, some of them attractive. Or at least attractive-looking ones. OUN® wants you to keep your feet on the ground and succeed without paying expensive fees. Housing is by far the most important form of wealth in Finland. Buying one is probably the biggest investment of your life. It goes without saying that the subject must be taken with due seriousness.

First stage: planning

The first thing you need to do is make the decision to buy your first home.

It’s worth thinking about what your future looks like: are you already at a stage in your life where you can anticipate future events at least a couple of years ahead? If so, what kind of things do you think are going to happen? Are you alone, a couple, or is the size of your family changing? What kind of demands will that make? Buying your first home should not start with an active house-hunting spree. The time for that will come later.

Schedule

Start by defining a realistic timeframe for the project. As a rule of thumb, haste is not good!

It is a good idea to define the target state and to consider the timeframe for achieving it. Feel free to list all the things you want from your new home. Once you have completed the list, prioritise the things on it and see which ones are realistic to achieve at this stage. It’s very likely that the large detached house you want by the sea in a big city centre will stretch the timetable quite a long way, so it’s probably worth trimming down the list a little. Be optimistic and realistic at the same time!

Type of dwelling

Once you’ve chosen the type of home, the first thing to consider is its size: how many rooms, whether there should be a balcony, a sauna, or anything else critical to you. Do you want your own yard, or would an apartment building suit you better? If an apartment building, how high up would you like the apartment to be? Do you need an elevator?

It is better to define the size or type of dwelling at an upper limit. Even if you think you can “get by” in a small studio apartment, a two-bedroom may seem like a much better option after a while.

Living environment

What do you want from the environment? Do you want to live in an urban environment, close to all services and with good public transport? Or would you prefer a more peaceful environment? Do you plan to drive your own car? If so, you should also consider parking solutions. Do you have children? Think about it from their point of view too. Is there a day-care centre or school in the area and how far away is it? Are there playgrounds?

Funding

When buying your first home, the maximum loan may not exceed 95% of the purchase price. If you are using a mortgage to finance your purchase, you will inevitably need to finance it yourself. So if you have set your timetable correctly, you should be able to find at least 5% of the purchase price yourself. If your schedule allows, consider an ASP savings and loan. This is possible under certain conditions and includes attractive options, such as a free state collateral and tax-free interest and additional interest on your savings. Check with the State Treasury for the details! First, approach your own bank, whether you are dealing with an ASP or not, and start mortgage discussions. However, it is also worth competing with other banks! You can use your own bank’s proposal as a kind of baseline against which you can compare your own bank’s proposal. Be careful when making comparisons, and don’t just focus on the total interest rate. Interest rates tend to change over the years, put more weight on the margin, which is always added to the current reference rate.

The interest rate on a loan is always linked to a reference rate. The interest rate is always reviewed at regular intervals. The shortest mortgages are linked to the three-month Euribor. In Finland, mortgages are typically tied to 12-month Euribor, but a fixed-rate loan is also possible. It is therefore more important to consider whether to take out a variable-rate or fixed-rate mortgage. A fixed rate is usually somewhat higher than a variable rate, but it brings predictability to the cost of servicing the loan. Take a look at our blog post on the subject!

Banks also offer a range of products designed to protect you from changes in the reference rate. However, remember that these types of products are subject to a fee! Carefully calculate whether you need such a product.

Once you have made an appointment for a mortgage negotiation, prepare carefully. Be honest about your disposable income and equally honest about all your regular expenses. Don’t sugar-coat things, you’ll only get yourself in trouble. Honesty, openness and transparency will produce the best results. You will receive a loan promise from the bank, which does not yet commit you to anything, but with which you can move forward with your project.

Second phase: preparation

Even at this stage, the rush is only a hindrance.

Searching

Start browsing homes for sale on portals such as Etuovi.com and Oikotie.fi. The portals are slightly different, but in practice you can find the same properties on both. You can also find all sorts of other practical information about buying a home. Set up search handles on the portals using the criteria you specify and you will be notified by email of any new properties that meet your criteria, as well as any changes to properties already listed there.

Read the sales ads carefully, compare them with each other. But remember at all times that this is an advertisement for sale, the primary purpose of which is to get the property sold. The OUN® also strongly recommends that you focus on properties sold by a registered estate agency, preferably a legalised licensed realtor. RE qualified realtor will have demonstrated, in order to be qualified, that they have the necessary knowledge to carry out their role and therefore also the necessary legal knowledge. Often, sales in estate agencies are also handled by other persons, usually designated as estate agents. They are often more willing than skilled, although an alert agency will usually ensure that, for example, the documentation of the property being sold is in order.

Also remember that there are big differences between the new and the old site, and they therefore require a slightly different approach. You can read more about this in our blog on the subject.

You often hear people say, “What do you need Realtor for?”. Selling yourself saves you money! Do you save, and if so, who does? However, the so-called self-seller -in order to save the commission- usually prices the property at least at the same level as other similar properties, so the buyer cannot be credited with any savings. But the most important reason for avoiding self-dealers is the fact that buying from one is a transaction between consumers. In that case, consumer protection laws do not apply. When the sale is made by a broker on the basis of a commission contract, the broker is bound by a duty of disclosure and, if necessary, a specific duty of disclosure. Both the Realtor and the self-dealer must inform the buyer of any information that may have an influence on the decision to buy. If Realtor makes a mistake in the sale, the intermediary is the subject of the complaint. If it is the self-dealer, the complaint must normally be lodged with the district court. Protect your own back and choose a home sold by Realtor! Remember, however, that Realtor is only responsible for its own actions, i.e. whether it has complied with all laws and regulations and Good Brokerage Practice. The seller is always ultimately responsible for the home he/she sells, two years for condominium sales and five years for real estate sales. Under certain conditions, these liability periods may also be longer if the seller can be shown to have acted with reprehensible/seriously negligent behaviour.

Interesting destination?

Once you have found an interesting target, try to keep your emotions in the background. Look around carefully and use your senses as well as your eyes. Pay attention to the indoor air: What does the target smell like, or does it smell at all?

If there’s a nice smell of bun and coffee in the air, or the smell of an air freshener in the wet rooms, the warning lights should come on. Look carefully at the condition of the wet rooms in particular: whether the silicone seams have dried out or are darkened, check the functionality of the drains (i.e. whether the water is running towards the floor drain).

Check the functionality of other drains. If there have been any major renovations, make sure they have been done properly and at least reported to condominium.

It is important to keep in mind that it is wiser to buy a poor apartment from a good company than the other way round. Remember, surfaces are cheap! If the colour scheme of the walls doesn’t work, or even if the flooring is the wrong colour, it’s not an unreasonable cost to replace it. More expensive is to replace wet rooms and the kitchen.

But if condominium is in a bad state, it is much harder to do anything about it yourself, and may end up costing considerably more than a can of paint over time.

Try to see the apartment as a space! Try to look beyond the furniture, which often tends to attract the viewer’s attention. You’re not buying furniture, you’re buying a space to make your home your own.

Also pay attention to the plot. Of course, a property on it’s own plot is pretty straightforward, but if it’s a different solution, take a closer look!

Such as the ownership of the land, whether it is purely leasehold and how long the lease is, or partial and under what arrangement.

Still interesting!

Once you have found an apartment that could become your home, ask the Realtor or the seller for all the documents related to the property. Also the property manager’s certificate. The agent may be reluctant to give you a property manager certificate’s on the grounds of privacy, but without one you cannot proceed.

Also require access to common areas of the property, such as basements and similar. Again, use all your senses and pay attention to general cleanliness. They often reflect the way the company is run. If you notice something that makes you uneasy, feel free to ask.

If possible, try to talk to someone already living in the house. Ask as many questions as you can about the house itself, the company, the environment and anything else you think is relevant.

A couple sitting on the floor, examining house blueprints in a cosy home setting.

Step three: research

This stage is perhaps the most stressful of all. It takes time, but it’s not worth getting careless about. Once you’ve found something you’re interested in, it’s essential to get to the bottom of it. We have also addressed this issue in our Due Diligence in the housing market post.

Intensive-documentary-research

Documents

You’ve been given a big pile of documents to study. Have a look!

You should have at least

  • Sales brochure. (This is also an official document.)
  • Balance sheet
    • financial statements
    • balance sheet
    • budget
    • Counterpart funding statement
    • activity report
    • auditor’s report
  • Articles of Association
  • Energy certificate
  • Property Manager’s certificate
  • Maintenance budget plan
  • Floor plan

Every document is important, none of it is there for nothing. Read them carefully, not just by sight. If you find conflicting information between documents or if something comes up that you don’t fully understand, write it down immediately. Before you read on.

Ask someone who really knows the answers to any questions you have. It’s much easier to sort things out beforehand than afterwards. And remember that help is available here, for example.

Renovations

Consider whether the property needs any renovation before you move in, and estimate the cost of any such renovation. The cost of the renovation cannot be included in the mortgage, but will have to be financed in some other way.

You’ve probably seen the apartment furnished and as a general rule of thumb, it looks very different when empty. Boards, carpets, furniture and other things that are part of a normal home can show surfaces in a completely different light once they are gone. And if one part needs a refurbishment, the one next to it will look even more shabby after a fix…

However, replacing surfaces is reasonably cheap and, if you have to do it, it is much easier to do it in an empty home.

Environment

Find out if there are any big changes in the planning for the neighbourhood. Don’t count on the area looking finished. The world is changing all the time, and it is not unheard of for construction or infrastructure projects, even large ones, to be carried out in “finished” areas. What such projects have in common is that they almost invariably cause at least some noise pollution. Often temporary, but it is good to be aware of these too.

A good example of how the obvious often comes as a surprise is aircraft noise. If there is an airport in a locality, there is a fairly large area around it where you are exposed to aircraft noise.

When you are aware of things in advance, they are easier to live with. And if something is too much, it’s still easy to put on the brakes at this stage. Because you’re not a NIMBY, are you?

Step four: action!

Now that the preparation, planning and research have all been successfully completed, it’s time to get started.

Naturally, this step must also be handled with care!

Consultation

At the same time as you start negotiating with the seller or their representative, present the property to the bank of your choice and make sure you get the green light from the bank.

During the negotiation, discuss more than just the price you are planning to pay. Outline a timetable and take a position on the things you want to change. If there’s anything you’re not sure about, don’t hesitate to ask! It is the seller’s and/or realtor’s responsibility to give you answers to all relevant questions, as both are bound by the duty of disclosure. There are no stupid questions, except stupid questions. Like whether there have been other offers on the property or why the seller wants to sell. You will not get answers to these.

But always remember that licensed realtors are skilled at creating and increasing buying pressure. It’s part of their job description and you have to understand that, but you can’t let it get in the way!

If you need help with negotiations and a further offer, you can find it here!

Making a takeover bid

The offer to buy sets out the terms on which you, as the buyer, are prepared to make the deal.

It must specify more than just the purchase price offered! Such as:

  • Information on the object of the transaction
  • Both buyer and seller details
  • Validity and binding nature of the Purchase Offer
    • the period of validity must be such as to allow the seller to react to it
      • typically talking about one to three days, with times.
    • the purchase offer becomes binding the moment the seller becomes aware of it
      • the offeree must clearly indicate to the seller his/her response to the offer.
    • the seller can either accept or reject the offer or make a counter-offer to the buyer
  • Date by which the transaction must be completed
    • this is usually due to the bank’s timetable
    • digital house purchase (DIAS), is more often faster than the traditional way of trading
    • typically a timeframe of 1-3 months
  • Payment method
    • cash, but this does not mean a portfolio of banknotes, but that the transaction is paid for in cash, rather than, for example, in securities
      • typically paid in full at the time of the transaction
    • however, the buyer and seller are free to agree on the method of payment to be used
  • Transfer of ownership and control
    • ownership of the shares is transferred when the purchase price has been paid
      • typically as a result of a transaction
    • The possession right can be freely agreed between the seller and the buyer
      • this is also typically transferred in the course of a transaction
  • Any other terms of the transaction
    • a purchase offer may also be conditional
      • the most common are selling an old home or getting a loan
  • Sanctions
    • the offer sets out the sanctions for both the buyer and the seller in the event that one party refuses to complete a transaction already accepted by the parties in accordance with the offer
    • the offer also specifies the consequences of any delay in the delivery of the accommodation
  • Sales price
    • The price is always quoted net of debt
      • if the shares to be purchased are subject to a debenture stock, it is stated that it is included in the price without debt and that the buyer assumes the debenture stock as consideration.

In practice, licensed realtor prepares a purchase offer based on the information provided by the buyer and submits it to the buyer for review and signature, which the buyer, after accepting it, delivers to the seller.

Commerce

The actual transaction can be done physically, usually at the buyer’s bank. If the transaction takes place digitally (DIAS), it is done entirely electronically. In both cases, the seller/realtor provides all the up-to-date transaction-related documents for consultation so that both parties have access to all the information relating to the transaction.

Check all documents carefully and make sure they are as they should be. Make sure that the deed of sale contains all the agreed items so that there is no room for interpretation. And that only and only the things that were agreed are recorded. Make sure that your personal details are correctly recorded, that the details of the property being sold, including the share numbers, are correct and consistent with other documents, and practically everything else in the deed. Every line that is there is there for a reason, so don’t discount any of them. You can find help in this area here

In a transaction, the ownership of the shares is usually transferred as well. The transfer of ownership is recorded by a transfer entry in the paper share certificates and is the responsibility of the seller. However, in 2019, Finland has introduced an electronic apartment information system. All housing companys established after that year will be covered and older companies will be gradually migrated. If the condominium is already covered by the electronic apartment information system, the bank will make a request for registration of ownership, which will be accepted electronically by the seller. However, very often the share certificates for shares sold are still in paper form. If they are held by the seller’s bank, they are transferred from there to the buyer’s bank by mutual agreement between the banks at the time of the transaction, or they are delivered by the seller himself. In practice, in the case of a digital house purchase (DIAS), licensed realtor will take care of the registration of the ownership together with DIAS and the bank.

Transfer tax. It is paid by the buyer on his own initiative within two months of the transaction. In reality, it is usually paid at the time of the transaction, if the transaction was handled by licensed realtor.

If and when ownership and management rights are transferred in the transaction, remember to take the keys to your new home with you when you leave!

Migration

Remember to submit the statutory notification of your move to the National Directorate for Digital and Population Information at least one month before the actual moving date. And don’t forget to sign an electricity contract! It’s a shame to move in the dark!

Moving house is usually not much fun, but perhaps moving into your first home is one of the most enjoyable. Organise your moving truck early, pack carefully and well in advance, recruit enough muscles to help and make sure your muscles have pizza and a drink.

Congratulations on your new home! ☺️

And that’s not all…

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