Buying your own home can be a daunting prospect. Many of us have spent our lives renting, so when we decide to take the step up to owning property we often aren’t quite as prepared as we should be. Here we break down exactly what a first time home buyer should know before signing on the dotted line.
1. Become an Expert
The first thing many of us do before we buy a new mobile phone, TV or even a pair of running shoes is we research. We look up the product online, compare specs and read countless reviews before finally making our decision. You would think most of us would do that on the biggest purchase of our lives – a house. The thing is, we don’t.
Not only should you research the housing market extensively, comparing properties in your desired locations, but also get a Comparative Market Analysis (CMA) to compare the price you are being asked to pay with other prices in that neighbourhood. More often than not the estate agent involved will offer you a 1-piece brochure with information on the property – don’t be afraid to request more! Buying a house is a 20-year commitment and one that should not be entered into lightly!
2. Check You Credit Score
The major stumbling block in most property sales is financing, with only 1 in 4 home loans being approved. What many of us don’t realise is the importance our Credit Score plays in this decision. Your credit score will determine the rating the bank and other financial institutions give you after examining how you have handled credit in the past. If you have a “thin” profile and little or no debt, it generally means you have little information the bank can analyse and you may find it strange that the bank may request that you first open a store account to establish a credit profile and then come back to them
If you’re in the market for a new home, check out how much you could qualify for at My Bond Fitness. By knowing your credit score, you have the chance to improve it over time. This could potentially save you up to 30% on your bond payments.
- Size Matters
After you have found out your credit score, you can check your affordability. This takes into account your income and expenses, working out the size of the loan you could potentially get from the bank. Knowing how much you could possibly borrow makes the entire process far simpler. Most agents will show a client several houses before they decide on the one they really like. After the potential owner has decided, the agent goes about running all the necessary checks, including their credit record and what they could possibly afford. By knowing exactly what you can afford before beginning your search you not only remove the risk of falling in love with a house you can’t afford but also improves the chance your agent can find you one you will like in your price range.
4. Budget Before You Buy
As simple as this may sound it can truly save you in the long run. When thinking of buying a home take an honest look at your finances. Replace your monthly rent with the potential bond repayments, as well as costs like house insurance, rates and taxes, levies and property maintenance. All these costs add up and could put a strain on your monthly income.
Budgeting for other costs like the bond registration fee and transfer costs can also spiral out of control. Use something like Avid Firefly, an application that works out the possible costs involved in the purchase of your home. There are also plenty of personal budget apps out there, like Mobile2Budget, which make controlling your finances so much simpler. Try one out for a few months to see exactly where your money is being spent!
5. Working Hard For Your Money
Getting a home loan is a difficult business and can be made even more difficult depending on how you’re employed. A full-time employee with a constant paycheque is a far more attractive prospect for any lending agent than someone who is self-employed or commission-based. If you are self-employed or work for commission contact a home loan consultant before you consider buying. There might be some serious red-tape you need to get around and the last thing you want to do is lose out on your dream home because of delays with your bond approval.
6. Shop ‘Till You Drop
Once you know where you stand financially, the fun part begins. Use absolutely every means at your disposal to find the right property for you – and don’t be afraid to keep asking for more viewings. Get online with Property24, Private Property and even Gumtree to supplement any properties your estate agent might be showing you.
This isn’t an exclusive relationship! If you can find a private sale you could save yourself thousands of Rands in commission costs. Then ask your attorney to prepare an offer to purchase to present for the seller. Also, don’t be afraid to shop around for the best bond amount and interest rate. Your bank might not offer you the best deal, and there’s no harm in asking around.
7. Get Your Grant
Not many of us know this but there is in fact a government grant for first time home buyers. If you earn a collective household salary of between R3501 and R15000 a month you could qualify for the FLISP grant. This grant was put in place to help bridge the gap between free housing and those who need just a little help in owning their own property.
The problem with the FLISP subsidy is so few people know about it. We quickly realised this and wanted to help people understand what it is and how to get it. If anyone is interested in the FLISP subsidy, please contact us on our website www.flisp.co.za.
8. Expert Opinions
Like the FLISP grant, there are many other property related things very few of us actually know about. This is where getting yourself a property attorney or conveyancer to scrutinize every part of the purchase process could become invaluable. The “Offer to Purchase” you sign is a legally binding document, usually with penalties that you need to understand fully.
By having your own representation on your side could really save you from some nasty surprises. Do not rely on the estate agent to guide you alone – he or she may be acting only in the interest of the seller, or their own commission.
9. Inspector Gadget
One of the most important parts of buying a home is having it inspected. Buying something “voetstoots”, or “as it stands”, is not only dangerous but could end up costing you in the long run. Don’t be afraid to insist on a full home inspection to go along with the mandatory checks. Spotting something like a structural problem, dry rot or a pest infestation before you purchase means you have the chance to request the owner takes care of any issues before the sale goes through.
10. Creative Credit
There are times when getting a home loan just isn’t possible right now. Luckily there are alternatives to getting a loan through the bank. Be creative and consider options like a “Rent to Buy” or Installment sale. We realised after the economic downturn in 2007/2008 that banks weren’t willing to lend money as freely as before. Rent2Buy is seen as “plan B”, when you cannot immediately convince a bank to approve your home loan. You can show that you are financially ready to own the property but to convince a bank you just need that extra bit of time. By entering into a Rent2Buy deal with the owner the buyer doesn’t lose out on the property, the owner earns decent interest on his investment and the estate agent still retains his commission – a win for all involved.