When it comes to buying your first apartment, we must admit that it is one of the very important moments in life that you have probably been waiting for a long time.
Are you thinking about an apartment in California?
A large number of California citizens do not have their housing issue resolved, and buying an apartment is one of the most important decisions. So find out in time what awaits you if you are planning to search for a new roof over your head. The most common cause of mistakes is uninformed customers, and intermediaries sometimes have an unprofessional approach. In order not to get into an awkward situation, get acquainted in time with the way the market works, but also what awaits you if you want to buy an apartment on credit.
Scientific studies have shown that for the average resident, buying an apartment is one of the most stressful events in life. There are different reasons for buying, and the fear of fraud scares buyers the most.
Additional costs when buying the first apartment
The price of the property is always determined by the market, so you should get acquainted with the real prices in time. Experts can help you with that, because real estate agents know very well whether the investment in a real estate is good or the sale price differs a lot from the market price.
Find out in time about the additional costs when buying, so that you do not get into an awkward situation later. If you are buying an apartment for cash, you may have the obligation to pay a fee at a notary, a tax on the transfer of absolute rights, but also a bank commission in the case of a money transaction.
For home loan users, the additional costs are higher, so consult your banker in time about the amount of money you need for all costs when buying an apartment.
Should the down payment be taken seriously?
When buying real estate, whether it is an apartment, house or business premises, it is necessary to pay a down payment. Although many buyers do not take it too seriously, down payment is an insurance, but also a binding factor when buying and selling. It guarantees that the interested buyer will take the apartment, and also obliges the seller to sell the property to that very buyer. It is very important to pay a down payment in order to protect the buyers if the seller gives up the sale of the apartment.
Make the pre-contract so that it clearly states the height of the down payment, and the buyer gives it to the seller at the moment when the pre-contract is signed. In the pre-contract, be sure to state the amount paid so that you do not get into an awkward situation later when paying the rest of the money. The down payment should be 10% of the total amount, but it also depends on the buyer whether he will set aside exactly 10% or would like to pay a little more money.
Cash or credit for the purchase of the first apartment – the question is now!
In California today, people mostly buy apartments for cash. Only 20% of citizens buy apartments on credit, while 80% of them still choose to buy real estate for cash. Real estate agents are there to help with the appraisal of the value of the property, and the home loan is defined in relation to the appraisal officially determined by the appraiser. The appraiser of the bank should define the real price, and in order for the citizens to be sure of the appraisal, the real estate agency will come to the rescue.
Three times more apartments are sold annually in California, something that is built on these real estates. The most sought after are housing units that have a good location, but also a good price-quality ratio.
If you have cash in your money to buy an apartment, then the procedure is much simpler than when it comes to taking home loans. But, solving the housing issue is not easy at all, that is why a part of the citizens prefer to opt for a loan. And here’s what you need to keep in mind if you have decided to buy an apartment on credit.
Buying the first apartment on credit
When buying the first apartment on credit, it is important to gather all the necessary documentation. Six documents are required, and all documentation should be completed within five working days. From the documents you should have:
When it comes to other documentation, your personal banker will prepare it completely.
What costs await you?
When applying, you need to know that there are certain costs that await you. Namely, the following documents are paid:
- report of the Credit Bureau;
- Issuance of real estate lists;
- certification of real estate purchase agreements;
- real estate appraisal.
- If you do not have the required documents, then you will need about five working days to provide them
The loan approval process ends when the money is transferred to the seller’s account in the amount of the requested loan. The loan is always placed in dinars, and the seller receives the amount in the currency prescribed by the sales contract. We recommend that the seller of the real estate has an open bank account through which the loan is paid out in order to speed up the process, simplify it, reduce costs, and make payment more secure.
Home Loan Insurance
VATwhen buying your first apartment
refundWhen you buy a property, you are expected to pay two mandatory taxes. You must regulate the value added tax and the tax on the transfer of absolute rights.
It is also important to know the following. The first owner is a person who has not had a share in the apartment so far, nor a share in the family apartment building. A person who has not had a real estate or property idea in it since July 2006.
According to the law, reliefs are prescribed for these buyers, whether it is a new building or an old apartment.
If you are buying a property of old construction, then it is yours to pay the tax on the transfer of absolute rights, which amounts to 2.5% of the total value of the entire apartment. In case you are buying an old building and you are the first owner of the property, then you are exempt from this tax.
The first owner of an apartment who buys a new building and is obliged to pay value added tax of 10%. The amount of VAT is provided by the amendments to the Law, and since you are the buyer of the final product created by the investor, you must pay VAT. Please note, if you are the first owner then you must pay VAT, and the agreed price must be paid in full to the person selling the apartment, with the money to be paid into the investor’s account.
However, the situation is somewhat different when real estate in new construction is bought directly from investors. The first owner is exempt from the tax on the transfer of absolute rights, which means that you have the opportunity to request a VAT refund, because it was paid through the purchase price.
Since the tax exemption is related to the square footage of the apartment, the first owner is exempt from the tax for square footage up to 40 square meters, and members of the family household for each member up to 15 square meters.
When you buy your first property from a natural person, you are exempt from the tax on the transfer of absolute rights, in which case you are not able to claim a VAT refund.
And to note, the right to a tax refund can be exercised when you file a tax return with the competent branch of the California Tax Administration in the municipality where the headquarters of the company that is the seller of real estate.