First-home buyers' guide

12 January, 2020

Not so long ago, I bought a house as a single-income first-home buyer using Kiwisaver and the HomeStart grant under the Welcome Home loan scheme (10% deposit). It wasn't always the most straight-forward process, so I thought I’d write a short guide as to what to expect. (n = 1, of course.) A lot of this stuff is available online, but there are a few things in here that weren’t obvious when I began the process, so I hope it can help someone out there.

The homework

Check which institutions do Welcome Home loans (there are only a handful). You will have to fill out a big application detailing your income, assets, debts, etc.
Apply for the HomeStart grant. This can take a few weeks to be approved, so do this at the same time as you are applying for the home loan. When approved, it will be valid for six months and conditional on you getting a house that they approve of. As I understand, they will be more likely to approve a freehold house rather than an apartment, or a leasehold, etc.
Contact your Kiwisaver provider to provide you with a letter detailing how much money you are eligible to withdraw. In most cases it will be all but $1000. You will need to provide this letter to your bank. I didn’t do this, but I think it would be wise at this stage to move your Kiwisaver money into a conservative fund (if you haven't already).
Find a lawyer. I basically went with a random one that I found here. Just flick them an email and say you’re looking at properties and you hope they can be of service. You may want to shop around. Mine was a flat fee of approximately $1200 that was payable only upon settlement (i.e., if you never buy a property you don’t owe them anything). I'm not in a big city. Most of the work is actually done by the clerks, not the lawyer.
Start looking at properties. This sucks. There are plenty of good guides on the internet of what to look for, and that is outside the scope of this post. It will most likely be depressing.

Oh shit it's happening

Making an offer!? Tell the agent that you want to make an offer. They will ask you to email them all your details, and any conditions you have. Common conditions include a builder’s report, finance, LIM report. Less-common conditions might include things like a meth test. Personally I think that’s a waste of time and a bit of a scam, but again, outside the scope of this post. You will need to specify the date that the offer goes unconditional, and this should be at least 10 working days from the date the offer is signed, because you need to allow time to get your finance approved, builder’s report done, and so on. If the property is tenanted, you need to find out when the lease ends. If it’s a periodic tenancy (six weeks notice), then settlement should be six weeks after the unconditional date. Check these dates closely. Housing NZ will not approve the Welcome Home loan unless you can prove that the property will be vacant on settlement date.
Your offer is formalized in the Sale and Purchase agreement (S&P). 90% of it is standard, approved/written by REINZ and Auckland District Law Society.
Check your S&P closely. On the front page, look at the Property box, check that the estate (e.g., fee simple, leasehold, etc.) is what you think it is. The Payment of Purchase Price box is self-explanatory, however it has a section for a deposit. This, I believe, is to be paid to the agent’s trust fund. You are not required to make a deposit. Withdrawing your Kiwisaver funds takes quite a lot of time (they say to allow for not less than two weeks) and requires forms prepared by your lawyer. That being the case, it’s perfectly reasonable not to pay a deposit if you’re using Kiwisaver. The settlement date is also in this box.
Inside the Conditions box are standard clauses for conditions such as LIM, building report, OIA consent, etc. However, these are typically not used (they are crossed out), and the agent will write the conditions in the appendix. No idea why this is, but it seems to be very standard.
Before you meet the agent, email your S&P to your lawyer and get them to check it. It’ll probably be the clerk that actually checks it. They should get back to you quickly (e.g., within a day or two).
You meet with the agent at their office. They will give you the guide, and a dispute resolution form. They will then go over the sale and purchase agreement with you. I made five offers with five different firms and they all had wildly different processes. You might be done in 15 minutes, or in an hour and a half. Some real estate agents loooove to yarn.
Sign that fucker. If there are multiple offers, you’ll have to sign a piece of paper saying you know the situation, this is your best offer, and so on and so forth. At this point, the agent may or may not try to imply that you should make a higher offer, lol.
If your offer is accepted, immediately send it to your bank, and send in the already pre-approved HomeStart grant form. Your bank will hopefully then approve your finance, but it will be conditional upon Housing NZ accepting everything.
Housing NZ will only approve the Welcome Home loan if you obtain a registered valuation that is no less than your purchase price. This is because, with 10% deposit, there is little wiggle room if something goes wrong. Therefore, you will need to pay approximately $600 for the valuation. This also implies that you can’t really overbid on a property.
Another thing with the Welcome Home loan: you will need to pay mortgage insurance to Housing NZ. This is 1% of the principal (possibly 1% of purchase price, but I think it’s the mortgage principle), so it’s likely to be at least a few thousand. At least, this was the case in 2017; it may have changed since then. By default, this is wrapped up into the loan. You may want to pay this as a lump sum at the beginning. If you intend to do this, then notify your bank before they’ve sent the documents to Housing NZ (i.e., notify them when your offer has been accepted), because otherwise they will have to resend the documents to Housing NZ, which could take another week or two, which is the last thing you need in such a stressful time.
Why do you have to pay mortgage insurance? If you default on the loan, since you only have 10% equity, if there’s a crash in prices, they may not be able to sell the house and recover the full value of the loan. The premium that you pay is to a 3rd-party insurer that is guaranteeing that if that scenario occurs, then they will pay the bank the difference (i.e., the bank will not lose out). Funnily enough, this insurance doesn’t protect you: The 3rd-party insurer will then come after you for the difference. In summary, you’re paying several thousand dollars to protect the bank. Good times.
While we’re still talking about the Welcome Home loan… Housing NZ will probably want to see the last three months of statements of all your finances. This includes savings accounts, credit card accounts, investments, debts, evidence of Kiwisaver funds (the letter you get from your provider…). This is not a fun task but be prepared for it.
Get a builder’s report, obviously. That’s another $500.
Get a LIM report from the council. That’s somewhere on the order of $300, depending on the council.
When you have all your ducks in a row and your bank has approved everything, you’re good to go unconditional. Meet with your lawyer to sign the form saying it’s unconditional! Now you can fill out the Kiwisaver withdrawal form. It will need to go to your provider via your lawyer and you’ll need to sign some documents in front of them.
Your bank will send your lawyer the home loan documents. Meet with your lawyer to sign those documents, as well as the transfer-of-title documents. This will need to occur at least a few days before settlement, I believe. Also at this time, see if the lawyer will provide you with a free will.
Arrange with the agent to go for a pre-settlement inspection the day before settlement. This is to ensure that they haven't wrecked the place since you last saw it.
Your lawyer should call you when settlement has occurred, and you can go pick up your keys from the agent. Congratulations, you’re now in debt for the next 30 years!

As a quick estimate, your likely closing costs will be something like this: $1200 lawyer; $600 valuation; $500 builder’s report; $300 LIM report. That’s around $2600. (As above, you may also want to pay the mortgage insurance up front, which is another few thousand at least.) Finally, depending on your current living situation, you're gonna need to buy a bunch of things. I'd been flatting for a long time previously, so I had quite a lot of stuff, but I still needed to buy, e.g., fridge, microwave, toaster, broom, brush and shovel, mop, padlocks for the shed and garage, cleaning products, a window latch, a million fucking power tools (story of my life), lawnmower, light bulbs... etc... probably another few thousand. This will be less if you've been living in your own flat with all of your own stuff, but yeah, be prepared.

Phew. I didn’t realise it would be that long. I hope that was useful to someone, and if anyone has any questions, or sees any mistakes, please let me know :)