If you’re dreaming of owning a home, there is a lot you can do before you even start trawling property portals to find a spot.
In fact, some steps that need to be taken first can take some time, so the sooner you start laying the foundations of your property buying journey, the better.
And the time to buy is now, says Gerhard Kotzé, managing director of the RealNet estate agency group. House prices are up all over the country, and with inflation and interest rates also on the rise, it could soon become tougher to get on the property ladder if you don’t pounce right now
One of the challenges, though, is that, with the cost of living rising steadily, along with petrol and energy price hikes, you might find you have less disposable income which, he says, is one of the key factors that banks look at when considering a home loan application.
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In addition, house prices “have also risen quite considerably in the past year” and this means that many buyers are already in a situation where what they can afford to pay will buy less than they would have a year ago.
Here are things to consider getting in order before you find your dream home.
1. Your credit report
A good credit report is essential if you’re going to be applying for home finance, says David Jacobs, Gauteng regional sales manager for the Rawson Property Group.
“It shows lenders how responsible you are and how well you handle debt.” Although there are websites that claim to provide free access to credit reports online, Jacobs warns that these might not be as detailed as the official versions.
For a more thorough report on your credit history, he recommends approaching a bond originator who will apply through official channels on your behalf, free of charge.
“A bond originator can also help you interpret the data you get back and offer advice on remedying any black marks.” Tracey Hutton, of Just Property Port Elizabeth, says many buyers don’t even know their credit rating.
“This is so important. It may indicate that you need to take some time to improve your score before starting the bond approval process.”
2. Clean up your finances
If your credit record isn’t as shiny as you’d expected, Jacobs says you should not lose hope as there is plenty you can do to improve it.
Settling any overdue accounts is the first step. “After that, focus on consolidating and reducing overall debt and paying the remaining essentials on time, every time.”
Lenders don’t just look at how much you owe, or how well you meet payment deadlines, though. They also like to see predictability and stability in your financial background.
“Try not to shift money between bank accounts too much, make any large or unusual purchases, or change jobs before making a property purchase.”
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3. Save up for a deposit
If you are a tenant, Johannes van den Berg, of Just Property’s N1 City Branch, advises that you choose a rental property that will still allow you to save up for the deposit you’ll need when you buy one day.
“Deposits impress the banks and have a positive impact on interest over the term of your home loan. “When you are ready to buy, choose a flexible bond so that, as soon as you are able to, you can put in more than the minimum payment. You’ll save big on interest over the long term.”
Jacobs agrees: “Being able to put down a good deposit makes it easier to get bond approval and almost always results in better interest rates. The lower your total bond amount, the lower your repayments will be, and the less interest you’ll pay over the lifetime of your loan, too. That can have a very real impact on your financial future.”
4. Know what you can afford
Before you head out on your house hunt, Jacobs says you need to know what price range you can afford to look at. Using an online affordability calculator can give you a ballpark idea of the loan size you might qualify for.
However, you must not set your budget based only on what you would qualify for.
“Buying a property comes with a lot of upfront costs like a deposit, attorneys’ fees and transfer taxes,” Jacobs says, adding: “Homeownership also has ongoing costs like rates, taxes, maintenance and insurance.
“It’s essential to consider all these expenses when setting your price limits to ensure your post-purchase monthly budget still has enough wiggle room to handle interest rate fluctuations and unexpected expenses.”
5. Understand what you are getting into
While you need to learn as much as possible about the purchase process, Adrian Goslett, regional director and chief executive of Re/Max of Southern Africa, says you also need to understand market conditions because there are many external factors at play when buying, selling or renting property.
There are two main ways to describe the condition of the property market – a seller’s market or a buyer’s market.
Each of these conditions will affect you differently.
• Buyer’s market: The market swings in the favour of buyers when there is an abundance of similar homes for sale in an area, he says. “This oversupply will drive down demand and prices are likely to be dragged down along with it. In these conditions, a seller might want to hold onto the current property until market conditions change.”
• Seller’s market: In a seller’s market, there are fewer homes for sale and for rent. “This drives up demand which also pushes up asking prices,” Goslett says. “Buyers will need to act fast and make competitive offers when looking to purchase in these kinds of markets.”
While it is a challenge to time the market right so that you buy in a buyer’s market, Goslett says it is important that you remember that each suburb will also have its own micro trends. These can either mirror or be completely opposite to, greater market trends.
“While it is easy enough to find out what type of market conditions the country is experiencing as a whole, local suburb trends are best discovered through a conversation with a local suburb expert.”
6. Get prequalified
Maritza van Rooyen, of Just Property Durbanville, recommends that you first get pre-approved for a bond before you go looking for the right home to buy.
“This ensures that you know their budget and don’t fall in love with properties you can’t afford.” Getting prequalified for a bond isn’t just a useful tool for figuring out what you can afford.
It also gives you an important leg up on other buyers when making an offer to purchase. “Since most offers are subject to bond approval, sellers tend to give preference to buyers who are prequalified, It’s an easy way to beat the competition if you’re up against other bidders on your dream home.”
Van Rooyen adds that it is a good idea to buy for less than the full pre-approved amount to ensure you can live comfortably and still afford the ongoing expenses of homeownership.
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