6 steps to buying your first home 14 Jan 2015 It’s the first month of a new year and many would have made resolutions or promises to themselves to make this year better than the last, by improving their lifestyle in some way or another. Regardless of the type of resolution, whether emotional, mental, physical or financial, without a solid plan in place and some direction, many resolutions fall by the wayside early on in the year. However, says Adrian Goslett, CEO of RE/MAX of Southern Africa, determining clear goals and setting a plan of execution in place will help to ensure that resolutions and goals become a reality this year. Its a new year full of new possibilities. Maybe you can finally achieve your dream of owning your own home. With planning and commitment you can make this dream a reality in 2015. It is especially important for consumers who intend to become homeowners during 2015 to have a plan of action that they can focus on to bring them closer to achieving their dream of owning their own property. Goslett says there are six key essentials that potential homeowners should bear in mind when putting their homeownership plan together: 1. Save, save, save There is no secret formula when it comes to getting ready to purchase a property, but one of the vital aspects to home-buying readiness is having enough money saved up to cover the deposit requirements and other costs associated with buying a property. Although it is possible to achieve a 100% home loan, most financial institutions will require the buyer to place a deposit of between 10 and 30% of the purchase price of the property to secure approval. What this essentially means is that a buyer will require a minimum deposit of around R100 000 on a property that costs R1 million, bearing in mind that does not include other expenses such as transfer costs and attorney fees. The other advantage to having a deposit, besides vastly improving the applicant’s chances of approval, is the fact that it can positively influence the interest rate provided by the bank. “It may not be easy, but potential buyers will need to curb their spending and cut back on any non-essential expenditure so that they can put as much money aside as possible.” Even a few hundred rand a month can make a difference and bring you a step closer to the goal of owning a property, provided you are consistent and stick to the plan. says Goslett. 2. Pay down debt Starting to save is the first step towards buying your own home. Even a few hundred rand a month can make a difference. So stop delaying and start saving now. Affordability is a key factor that banks consider when looking to grant finance to a potential buyer. This is largely measured by a consumer’s debt-to-income ratio and the percentage of expendable cash they have at their disposal. Generally, South African consumers have high debt levels, which puts pressure on their affordability ratios. “For those who are eager to get their foot into the property market door, paying down debt where possible is essential, along with avoiding purchasing any large items such as a car, for example,” says Goslett. It is better to stay away from any new credit in order to ensure that debt-to-income ratios remain within a favourable range. Regardless of whether a new item is purchased or not, an enquiry by a potential lender could negatively affect a consumer’s score, so it is best not to apply at all, he says. 3. Maintain a good credit score The majority of first-time buyers will be reliant on a financial institution for a bond to purchase a property. Therefore it is vital for consumers looking to obtain finance to keep their credit record in good order. Although the credit amnesty bill removed defaults from certain consumers credit records, this does not mean that a consumer’s credit score is any less important to maintain. A buyer’s credit score will have to be a minimum of 750 in order for them to be successful in their application for finance. A potential buyer’s credit score will also be taken into account when determining the interest rate that the bank is willing to provide. Consumers are entitled to a free annual credit report from most credit bureaus, so they will be able to check their score before they apply to the bank. “The new year is an excellent opportunity to go over your credit score and see where it can be improved,” says Goslett. 4. Know what you qualify for Affording a home is about more than just repaying your bond every month. There are other costs associated with owning a home, for example rates, taxes and levies. Make sure you take this into consideration when house hunting. The bank or a bond origination company will be able to assess a potential buyer’s finances. This will provide the buyer with some much needed guidance as to what they can afford and commit to over the term of the home loan. He says it is important that buyers consider affordability in terms of what they can sustain over the term of the loan, which includes expenses such as utility costs and maintaining the property. Resources are available to buyers to help them determine what the figure is and precisely assess their financial situation. These resources include financial advisers, banks and bond origination companies to name a few. “Ideally, bond repayments should not exceed 30% of the buyer’s total monthly expenses,” says Goslett. 5. Choose to work with the right estate agent The home-buying experience will be largely determined by the estate agent that the buyer chooses to work with, so make sure the selected agent is right for you. When looking for an agent it is important that buyers keep a few things in mind during the selection process, such as the brand the agent is from. “A reputable real estate brand will enjoy a large network of professionals at hand to assist where possible,” says Goslett. Another thing to keep in mind is that agents work in specific areas, so select an agent that has solid working knowledge of the area in which you are interested in purchasing, he says. The buyer must feel comfortable with the agent and they need to be able to communicate effectively with each other so that no time is wasted by the agent showing the buyer properties that don’t meet their criteria. The buyer is well within their right to request that the agent provides them with recent testimonials and references from happy clients. 6. Find the right home for you Look at your lifestyle and future plans to determine what criteria is required for the perfect home. Where possible, potential buyers should be researching and finding out as much information about the market and the properties available to them. “Knowledge about the property market will provide buyers with insight into the areas they want to live in and the type of property that will best suit their needs.” This will greatly narrow the search and provide would-be homeowners with useful information to make an informed decision. Knowledge is the key to success when it comes to determining a good property investment from a bad one, says Goslett.
Posted on: Wed, 14 Jan 2015 10:22:28 +0000
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