The purchase price depends on the amount you’ve saved up to use as a down payment and your ability to make monthly loan instalments. In most cases, the down payment has to cover at least 15% of the purchase price of housing.

It’s a good idea to start with a preliminary credit assessment to get an idea of your monthly payment capacity. You can also use our calculator to explore debt service on different loans. We advise everyone to be careful in taking on commitments.

There are many factors to consider during a house hunt. Look at the issue from as many sides as possible - how much space you need, distance to work or school and your plans for the future.

When you go to a viewing, you need to consider such things as maintenance, history and condition. Sellers are obligated to disclose important issues like maintenance requirements or any disputes but as a buyer, you are also obligated to do your own due diligence. It can pay to get the opinion of a professional realtor/inspector.

When you’ve found an apartment you like, inspect its sales memorandum carefully. The sales memorandum should include information about:

1. Selling price
2. Location, size, real estate number, construction year
3. Real estate value, lot value, fire insurance assessment
4. Registered liens, encumbrances and other restrictions
5. Cost of purchase accruing to the buyer
6. Change of ownership declaration
7. Residents' association statement (e.g. regarding impending projects)

It’s important to obtain information about property tax on the real estate as well as residents’ fees (for multi-family dwellings) as these may be significant expense items. The seller is obligated to provide accurate information about the real estate but the buyer also has a strong inspection obligation which requires you to inspect the property thoroughly before submitting an offer.

Once you’ve found the right property, it’s time to make an offer. Purchase offers are binding, enhancing the importance of being completely sure you want to buy the property you are making an offer for.

The real estate agent who handles the sale will help you make the offer. Purchase offers generally have a short validity period, such as 24 hours, and it is not unusual for the seller to make a counteroffer, which then has a new validity period.

Inspect the purchase offer carefully, making sure of the following points:

• Purchase price
• Delivery date
• Payment plan
• Amount of down payment
• Amount of loan
• Any provisos, such as regarding funding, residents' association statement or other issues.

When looking at housing mortgages, you need to consider your payment capacity, commonly referred to as debt service.

What loan term are you looking at, how fast do you want to see asset formation and what type of loan suites your needs?

The loan forms can also be mixed, meaning that part of the loan amount is inflation-indexed and the rest is non-indexed.

Once the purchase offer has been accepted, you need to undergo a credit assessment before applying for a loan. The credit assessment shows your debt service ability.

Completing a credit assessment is a matter of minutes and reveals your ability to service debt. The credit assessment process uses electronic ID and takes all expenses into account, such as maintenance of vehicles, instalments on other loans, etc.

Once the credit assessment and loan application have been finalised, it’s time to prepare the purchase contract.

The purchase contract is the final agreement between buyer and seller and provides for all key aspects of the transaction as well as the final purchase price. It’s important to review the purchase contract carefully with a real estate agent and to understand it fully before signing, because the purchase contract may differ from the signed purchase offer. Initial payment usually takes place when the contract is signed and the contract then provides for further payments, delivery and deed of sale.

The purchase contract sets out the dates of delivery of the property and signature of the deed of sale. Upon taking possession of the property, the buyer should take careful stock to ensure all points are as agreed.

The deed of sale represents final settlement of the transaction and quite often takes place around three months after delivery. Once the deed is finalised, the final payment is made pending the settlement of any cost accrued to the seller between the date of delivery and the deed. The seller pays operating expenses, real estate fees and other costs up to the date of delivery while the buyer assumes such cost as of that date, as will be detailed in the purchase contract.

The deed is issued once all costs have been settled and final payment has taken place as per the purchase contract.

Insurance is an important part of being prepared for unexpected events. While only fire insurance is mandatory, it pays to carefully weigh the available options because the cost of damages to your property may be extensive.

Most insurance companies offer similar coverage plans but premiums and the exact details may vary.

Real estate often comes with several types of insurance against various damage:

• Fire insurance is mandatory and insures against fire damage. The insurance amount is based on the fire insurance assessment value of the property.
• Additional fire insurance may be advisable, especially for older properties where the amount of mandatory insurance doesn’t necessarily reflect the cost to rebuild.
• Homeowners’ insurance is optional insurance against damages to the building itself caused by, e.g. water leaks, break-ins or damage to fixtures.
• Mortgage insurance is a special type of insurance that Landsbankinn offers in collaboration with Sjóvá and goes toward payment of the mortgage to lower the outstanding amount of the loan and monthly debt service in the event of the death of a borrower.