Before you begin the process of buying a house, it is crucial to figure out whether you are financially eligible to do so or not. Although you do not have to physically submit anything at this stage, it is helpful to ask yourself whether you are financially prepared to buy a property.
If you are considering buying a house, it is important to keep track of your financial information so that you know how much you can afford and what price range to look for when you start researching. Later on, your bank or lender will require this information from you before they can confirm your financial eligibility and grant you a mortgage.
To find out whether you are qualified in Japan, you can take the survey below and provide some of your most basic financial information. Your results will be sent to your inbox shortly after. In the email, there will be a link that can direct you to a site where you can request a mortgage application form, along with a list of necessary documents that you are required to submit if you want to continue with the purchasing process.
In Japan, there are two parts to applying for a mortgage: Jizenshinsa and Honshinsa. At this stage, you are only going through the process of Jizenshinsa, whereas the latter part will be discussed in more detail in a future step. The results should be available to you around three to seven days after your application, along with a rough estimate of your mortgage size. Typically, the mortgage size tends to be six to seven times the value of your annual income.
After you look through your income, credit, and savings, and you have checked that you’re qualified to apply, the next step is to obtain a Jizenshinsa, a mortgage pre-approval. It is recommended that you do this step before you begin selecting your properties because having a pre-approval is a helpful indication that you are indeed ready and that you can be officially approved later on in the purchasing process. Since a pre-approval is needed to confirm that your financial status meets the requirements of the loan of a specific house or property, the process usually involves a more detailed analysis of your financial documents. You can click the link below to see what kind of documents you should prepare:
Once you are pre-approved by Flat35, Hanabusa will assist you in applying for a bank mortgage pre-approval. Depending on your status, income, the number of years you have worked in your current workplace, there are different types of mortgages you can apply for. However, generally, we do not recommend bank mortgages to those who are self-employed(Kojinjigyonushi).
Step 2: Start Researching for a House
With a pre-approved mortgage ready, you can now move on to finding a house that falls into a suitable price range based on your financial status. This is the first thing you can do to narrow down your options, but there are other factors to consider as well. Listed below are some of the main points you might want to take into account while browsing through the market.
Do you have access to public transportation nearby(e.g. train stations, bus stops, etc.?
Are there commercial facilities and public services in the vicinity?
Is it close to potential sources of disturbance (e.g. landfill, construction site, heavy traffic, etc.)?
Type (duplex, condo, apartment, etc.):
Do you need more storage space (e.g. attic)?
Will the presence of stairs become a nuisance to you?
Are balconies, backyards, and gardens part of your priorities?
How many of each type of room (e.g. bedroom, washroom) do you need?
How many floors are you looking for?
Are you comfortable with living in a larger property that requires higher maintenance (e.g. cleaning), or do you prefer a smaller space of living?
Do you require a garage?
Is in-floor heating essential for you?
Would you consider properties that promote environmental-friendliness (e.g. the use of solar panels, the cultivation of a greener environment)?
What kind of fees, and how much are you prepared to spend in maintaining your property in the long run?
Evidently, there are many more aspects to look into when purchasing a house. By going through these questions during your research process, you will gain a better idea and direction of what you are looking for, which will aid you when you make your final decision with Hanabusa.
Hanabusa will accompany you in searching for a property through REINS (Real Estate Information Network System), a computer network system operated by the Real Estate Distribution Organization and designated by the Ministry of Land, Infrastructure, Transport, and Tourism. However, it is important to note that there is no guarantee of finding a house that fully meets your conditions. Therefore, it is highly recommended for you to map out your priorities beforehand in order to narrow down your choices and pick out the most suitable property that is available on the market.
Step 3: Make an Offer for a Purchase
Once you have chosen a property to your liking, you can make an offer for it and begin the purchasing process. Keep in mind that you are just expressing your intention of buying this specific property – meaning that there are no formal sales contracts being involved at this stage.
You are expected to place a deposit immediately after the owner of the property accepts your offer of purchase. This is to discourage “window-shopping” applications, and serves as a kind of guarantee that you will continue with the purchase later on. The amount depends on the seller, but it is usually a few ten thousand yen. As you and your seller continue to negotiate and go through with the deal, three different situations can occur that will affect the original deposit you placed:
If all conditions of the offer (made by both ends) are satisfied, then the deposit becomes a part of your down payment
If all conditions are met, but you cannot or choose not to continue with the deal, then you will not get a refund generally.
Step 4: Seal the Deal(Keiyaku)
Before the signing of the sales contract, Hanabusa will explain the important matters to you, either at the seller’s place or at the Hanabusa office. This comprehensive explanation process includes the confirmation of property details and the transaction conditions for the sales contract. Since there are many professional terms, you might encounter some unfamiliar words during your thorough reading of the contract. This is why Hanabusa will sit with you and talk you through all the details in this step, to better answer all the questions you may have regarding the specificities of your contract before you sign it.
After the explanation of important matters, and you are satisfied with all the terms and conditions, you can then sign a formal sales contract. Here, you will be charged a separate stamp fee of about 10,000 yen. This is also when you will make the down payment that you have prepared in step 0. Typically, this will end up being about 5 to 10% of the property price, which is why we recommend you to arrange for it early on before you begin the steps of purchasing a house. If you cannot arrange for the down payment in time, Hanabusa will consult with you.
At this point, you will also be required to provide a Condition of Finance (COF) deadline. Your mortgage has to be finalized and fully approved by this deadline, otherwise, the offer will be terminated and you will not be able to continue with the purchasing process. Since you are allowed to set the COF deadline, it is a wise choice to give yourself more time just in case there are complications during your mortgage approval, which is a future step that will be explained in more detail later on.
Step 5: Transfer Your Certificate of Residence
With a property chosen and your mortgage approved, you are very close to moving into your new home. However, in the case of Japan, there is an additional yet essential action to take whenever you move to a new place of residence, and that is to update your Certificate of Residence, or Juminhyo, as called in Japanese.
The Juminhyo is a record of your residential address in Japan, which will be used by the government for tax collection, health insurance, and census purposes. In order to transfer your Juminhyo, you will need your identification, your new address, and a few hundred yen. Hanabusa can assist you in the transfer procedure so that you can properly settle as a resident in a new place once you officially own your new house.
This procedure is often closely linked to the next step, which is the finalizing of your mortgage approval. Tenshutsu is the process of removing your old address from the records, and Tennyu is the process of adding your new official address.
Step 6: Finalize Your Mortgage Approval
Before the Condition of Finance (COF) deadline is reached, you have to finalize your mortgage. Assuming you have completed your mortgage pre-approval properly with a high level of competency, and that the property of your choice satisfies the requirements of your lender, this step should not be a problem. Generally, there are three parts to finalizing your approval. While this is going on, Hanabusa will work with you to complete other conditions, such as the inspection of your property.
Choosing a Mortgage Program (Honshinsa)
In order to conclude the mortgage approval, you will have to provide your lender with a comprehensive list of the property details, which Hanabusa should be able to help you with, as well as proof of your sealed contract paper. After this, your lender will introduce you to some mortgage options that are suitable for you, based on not just the rates but also the unique circumstances of each client. You might want to consider the mortgage rate, the amortization period, the payment frequency, and some special offers by certain lenders or banks.
Next, a loan application will be submitted to that selected lender, and the underwriting process begins, where they have to decide whether to approve your loan or not. This process can take anywhere from a week to a few weeks, depending on who the lender is. However, you can lower the risk of having your loan rejected by making sure that your income, credit scores, down payment, and property are all properly arranged and meet all specifications. Hence, getting a mortgage pre-approval and completing it early on can really help you prepare for this approval stage.
On the circumstance that your lender is taking too long to consider your application, and you are nearing the COF deadline, you can seek out another lender and apply for a loan with that one instead.
Conditional Commitment Processing (Kinsho)
If your lender accepts your application, it can then be approved, but on certain extra conditions that your lender will inform you of. If you agree with these conditions, then you will sign a commitment to show that you accept the lender’s offer and will continue on with the deal.
This step usually requires more documents from you that show proof of your financial eligibility, property details, and value of property (this will be covered in more detail in the third part). Again, you should already be fully prepared if your mortgage pre-approval went smoothly, and there should be minimal trouble as you get through the final steps of an official mortgage approval.
The final yet crucial part to finalize your mortgage approval is to have your property appraised, though this usually only applies to used houses. As mentioned before, this procedure is required by your lender so that they know whether the loan value is a reasonable amount to be spent on the property. Therefore, a licensed appraiser is usually hired to determine the value of the property and to ensure that the loan is in the right amount.
Step 7: Explanation of Home and Pieces of Equipment
Examining the property has become one of the routine steps in the process of purchasing a house, and is strongly recommended due to the fact that sellers would not benefit from informing buyers, like you, of any problems their property might have. For this reason, a thorough inspection of the house is usually done before the contract of purchase is signed. The aspects that should be checked carefully include but are not limited to:
the structural integrity of the house
security (locks on doors and windows)
utilities such as plumbing and heating systems
visible scratches or blemishes on walls, ceilings, floors, and other surfaces
separate building components such as the roof and underground foundations
the rest of the land around the house
When it comes to new houses, this step will be done after sealing a contract as new houses are less likely to come with major issues.
Step 8: Close the Deal
The last step before your move-in is to complete the purchase transaction with the seller. This process is mainly coordinated in a meeting with Hanabusa staff, your lawyer(Shihoshoshi), the seller, and everyone involved in the mortgage approval.
First, your lawyer(Shihoshoshi) will set you up with an appointment in order to confirm the title transfer. Here, you will be asked to bring identification documents.
To prepare for the final stage of transaction, you will be asked to sign a series of papers, which usually also marks the end of your lawyer(Shihoshoshi)’s “title transfer.”
Lastly, the funds correspondingly will be transferred to the parties involved in the deal and the deal will be closed.
On the closing date as well, you will be registered as the owner of the property, and you are ready to move in.
Step 9: Move-In
Once the transaction is completed and the title is successfully transferred to you, you will receive the keys. If you want to move in immediately, let us know your move-in day in advance so that we can help you stay organized and arrange for any utilities (e.g. water, electricity and gas) beforehand.
We are a real estate agency working hard to assist you in the mortgage application and real estate purchase processes. We provide services in English for those who are looking to buy properties in Japan but struggle with Japanese communication.