Whether you’re an experienced or first-time home buyer, making mistakes is costly. Not just in money, but also time, effort, and sanity. Worse still, you could end up buying a house that is entirely wrong for your family.

With the right information at your fingertips, you can get this process right from the start to help you make a smart purchasing decision.

How To Buy a House in Kenya

Table of Contents

1. Determining What You Can Afford

Do you already know how much money you spend monthly? Great, this will help you work out the amount you can set aside for the down payment.

Remember, apart from the down payment; you will need to budget for:

Title Search: You want to make sure the person selling the house, actually owns it. You can look up the owner easily through the eCitizen platform at a fee of Kshs 500.
Stamp Duty: This is tax paid to the Ministry of Lands. The fee ranges between 2% to 4% depending on the location of the property. This is paid through the Kenya Revenue Authority.
Legal Fees: The exact amount will vary from one lawyer to another. However, the fees range between 1% to 2% of the house price with a minimum fee of Kshs 35,000.
Mortgage Fees: The interest charged will be between 12% – 14% depending on the bank. You will also pay a loan processing fee of 1% of the loan amount and valuation fees of approximately 0.5%.
Home Insurance: To insure the house, you’ll pay a minimum of Kshs 5,000 per annum depending on the insurance provider and package.
Additional Costs: Think about home inspection costs, maintenance and repairs, moving costs and utilities.

2. Buying Using Cash or Mortgage

If you have enough money to make a one-time payment, then consider buying in cash. Because:

You will be in a better position to bargain on price and get a discount.
You spend less in the long run because you are not paying interest.
You can sell it faster if you ever decide to.

On the flip side, buying a house in cash means tying up a massive chunk of money in one place, leaving no room for other investments or emergencies.

The alternative for most of us is a mortgage. There are two types of mortgage plans:

Fixed-Rate Mortgage: the interest on the loan never changes until you are done paying for it.
Adjustable-Rate Mortgage (ARM): the interest rate may rise or fall depending on market condition.

Before you decide to go the ARM way, find out how much monthly payments you will be making if there is an interest rate cap and how the rates are likely to rise.

Use our Free Mortgage Calculator – Calculate Your Home Loan & Monthly Payments

Advantages of Mortgages

You will stay financially liquid and therefore have the option of investing in the stock market or bonds.
All you need is a downpayment of about 20%. Which means that you have extra money to cater to other expenses such as repairs once you move into the new house.
Lenders charge an interest rate of about 14% of the loan amount after which you’ll decide on how long you will make the repayments for.

Disadvantages of Mortgages

You’ll have a considerable debt to clear for a long time because of the interest accrued.
Because the mortgage is secured against the property, there is a risk of losing the house if you don’t keep up with the repayments.
If you chose the ARM route, the interest rate could rise, which means paying a higher amount than what was initially agreed on.
There are additional charges in the form of valuation and processing fees which can add up to a significant sum of money.

To add onto this, if you are buying a house with your partner or friends, you want to be sure that you are committed to the process because of the financial obligation to each other.

3. Finding Your Perfect Design Style

You’re buying a house to live in for a long time—if not forever. It’s best to pick a design that will work for you and your growing family.

Think about these questions when choosing a design.

Do you need space for the children to play outside?
Would you rather host your guests inside the house or in an open space?
Will your current furniture fit into the floor plan of the new house?

Answering these questions brings you closer to finding a house that suits your budget and your lifestyle.

4. Searching For Your Next House

Physical house-hunting can be time-consuming. It’s a relief to have the option of either hiring an agent or searching online.

Using an Estate Agent

You can choose to hire an agent to help you find a house faster. An estate agent has market knowledge that will come in handy when negotiating with the seller.

Additionally, an agent has access to houses before they are advertised due to their extensive networks. This puts you in a better position to get a fair price on the house due to less competition.

For starters, here is a list of verified real estate agents who will be happy to help you find your next home for a cost of about 3-6% of the purchase price. This fee will either be split between you and the seller or altogether paid by the seller. It’s worthwhile to seek clarification from the agent.

Searching Online

From the convenience of your home, you can search for a property that matches your needs; filtered by price, size and location.

Generally, house prices will differ depending on the location. According to the 2019 house price index, more people are buying townhouses outside Nairobi. This is because the cost of living is more affordable.

For instance; the average price of a three-bedroom townhouse in Kitengela is Kshs 11M. Get this. A three-bedroom in Kilimani goes for Kshs 30M. See how much money you could save.

5. Finding the Right Conveyancer

It’s crucial to hire a conveyancer – a licenced lawyer who specialises in matters relating to real estate law. They are invaluable when it comes to:

Researching the property and performing background checks.
Representing your interests when working with a real estate agent.
Drawing up documents and reviewing the contract of sale.
Providing legal advice in terms of the sale of the property.
Handling payments associated with buying the house.

Property law is complicated. But with a legal expert by your side, you will go through all the requirements to prevent you from dealing with unnecessary lawsuits.

6. Arranging a Home Inspection

When you find the house you love, it’s easy to rush to make an offer. But wait a minute. Do you know if the house is in good shape? Don’t only focus on what is visible. Often, the problems are only evident when you do a home inspection.

Hire a professional home inspector to assess:

The construction of the structure of the house; floors, ceilings, walls, drainage systems.
Interior plumbing; leaking pipes and the electrical system.
Insulation and ventilation.
The safety of the home.

After the home inspection, you should get a report detailing the problems found in the house. With this, you’ll decide whether to negotiate for a lower price, have the seller make repairs or find another place altogether.

7. Making Your Offer

If you decide to use an estate agent when searching for a house, this is another crucial stage you will need their expertise. The seller wants to sell for the highest price, while you want to buy for the lowest. Your agent will negotiate the price on your behalf with the seller’s agent.

If you decide to buy using a mortgage, it’s always best to approach the seller after the pre-approval process from the lender. This is to avoid wasting your time and the seller’s.

The agent writes an offer letter on your behalf to the seller. The seller will either accept the offer, make a counteroffer or decline it.

The offer letter is a legally binding document which contains:

The amount you are willing to pay for the house.
The down payment which is around 20% of the value of the property.
Pre-approval information.
The date when your offer will expire.
Closing costs which are fees paid to third parties to finalise the deal.
Conditions the seller needs to agree on if they accept your offer.

According to Pramukh Developers Limited, always go 5% lower than the asking price when making an offer. This gives you flexibility when the seller comes back with a counter offer.

Once the seller agrees to the offer, all parties involved will sign contracts to close the deal. Once the title is transferred to you, voila the house is yours!

The Ball is in Your Court

Hopefully, our guide has bridged the knowledge gap you had on the home buying process. With the right information, you are on the right track towards getting your next home for the right price.

A Step-by-Step Guide to Buying a House in Kenya