After a lifetime of renting, the step to becoming a first-time home owner can be daunting. When you sign on the dotted line it pays to be as prepared as possible.
You wouldn’t purchase a new laptop or car without doing your research, you probably wouldn’t even buy a new pair of training shoes, so approach buying your first home with the same level of enthusiasm and study. It’s an exciting journey – be prepared for the ride.
1. What do you need to know as a first-time home buyer?
While there is a lot of pressure to “get a foot on the property ladder”, you need to be confident that you are ready to take on such a big financial commitment. Is your income stable and sufficient enough to support a bond, are you earning a regular salary and are you secure in your job? These are all questions to consider before buying a house. If you are unsure, speak to a home loan consultant, who can review your income and give you advice about the home-buying process, including cost of deposits, and legal and transfer fees.
2. Do I qualify as a first-time home buyer?
Don’t be tripped up when it comes to financing your new home. Your credit score is vitally important at this stage of the process. It gives banks and other financial institutions something to determine how you have handled credit in the past. Having little or no debt may be detrimental to your application, as there may not be much credit information for the banks to analyse in an effort to evaluate you. There are many online sites where you cancheck your credit rating. Establishing your credit score in advance will go a long way to helping you know whether you stand a chance of qualifying for the bond you’re after.
3. What are your immediate and medium-term requirements?
Your first home may not be the mansion of your dreams, but purchase something that meets all your current and medium-term requirements. Consider your needs, as well as the needs of your family or future family. Think about security, proximity to schools and your place of work, as well as to public transport and shopping centres. Although you may get more home for your money in a less desirable part of town, consider that the value of your property may not appreciate if you’re thinking about going this route.
4. How are the monthly payments calculated?
Once you have found the house for you, it is easy enough to calculate the estimated amount you will be paying each month by using a handyonline bond calculator.
5. Do first-time home buyers make a down payment/deposit?
After signing the offer to purchase, you will be asked to put down a deposit. This can be up to 20% of the property purchase, depending on the seller and estate agent. However, the average is around 12%.
According to BusinessTech.co.za, in times of economic stress, the amount of the deposit rises. This is due to the fact that South Africa’s major financial institutions lend less money for bonds and therefore a larger deposit is required. Speak to your home loan advisor about the best way to proceed.
Some banks may not offer you a 100% bond on the property and in those instances you will need some capital in order to buy it. Consult a home loan advisor to pre-qualify you for an amount so you know what price range you should be looking at.
6. What are the insurance and cover needs when buying a home?
When you buy your home, the bank will expect you to take out building insurance. This is to ensure that the investment they are making into your property is protected. That said, you don’t have to take out the building insurance they offer – rather insure where you get the best value for your money and the best cover for the structure of your new home, as well as your home contents.
The purchase price of your home will decide whether you require life insurance as well. If you purchase a sectional title unit, the homeowners insurance is usually paid for by the body corporate, so confirm with the seller what kind of property it is.
Budget Insurance is an authorised financial services provider with FSP number 18178.