Buying your first home is an exciting process for any first-time home buyer, but it can also be daunting. Taking informed decisions is crucial in the process to ensure that your excitement is not overshadowed by possible financial mistakes. While this will remain one of the biggest decisions and expenditures for most people, the process does not have to be overwhelming if you adhere to primary home buying tips.
Take time shopping for a property you can afford
Before you embark on a house buying spree and scheduling viewing appointments, it is recommended that you work out what you can afford. Most financial institutions that lend bonds have home loan calculators which can give you an idea of how much you can borrow and what you will be expected to pay per month.
Buying a house comes with extra costs
When you buy a house, besides the bond amount, there are additional costs that you will need to factor in your budget. These may include once-off deposits, transfer duties, conveyancing fees and deeds registration fees. You will also need to factor in other costs of running a household like municipal levies, rates, taxes, building insurance, household insurance, security, and any other costs that you should investigate before committing to purchase a property.
If you are buying in a sectional title complex, you are within your rights to request the financial statements to ensure that the property is well managed by the body corporate or its agents, and is in good financial standing with its creditors.
It’s also a good idea to find out if there any special levies pending. A special levy is a tariff charged in addition to the regular levy over a fixed period. These funds are collected from owners to pay for big investments such as security upgrades, painting or significant maintenance. An impending special levy will impact your costs in the short-term.
Your credit score
It is important to maintain a good credit score to get access to a home loan. A credit score in South Africa is a three-digit number between 000 and 999. A score of 600+ will give you a fair chance of home loan approval, although this may depend on the institution which will fund your home loan. If you are worried that your credit score is not high enough, there are ways in which you can improve your score. These include clearing debts, and limiting your use of credit.
Your dream home
After you find your dream home, the first step is to sign and offer to purchase (OTP) – this is an agreement between you and the home seller that stipulates the conditions which need to be met before the home sale can commence. If you are buying a home for the first time or are not knowledgeable about the process, it is advisable to have an attorney or an estate agent help you study the agreement before you sign to ensure that you don’t miss critical information.
The agreement should include an obligation on the part of the seller to conduct a home inspection and inform the buyer of any defects. When you sign the offer to purchase, you can also list conditions that need to be fulfilled before you can complete the purchase. This can include the seller giving you time to find financing. While you may sign the OTP which the seller accepts, you should be aware that the seller is entitled to continue marketing the property. If they receive a better offer, they can provide the original buyer with written notice, informing them that they’ll have to waive the suspensive conditions and go ahead with the offer to purchase within 72 hours, or the offer to purchase will be rendered null and void, freeing the seller to sign a deal with the new buyer.
Financing your potential home
Once the seller accepts your OTP, the next step is to get a home loan and ideally gather funds for a deposit and additional costs mentioned above. Once your home loan is approved, legal procedures will follow. The bank will appoint a bond attorney who draws up documents for you to sign. On the other hand, the seller will appoint a conveyancing attorney who will handle the process to transfer the property to your name.
