Avoid these 7 first-time homebuyer blunders to secure your dream home
Category Advice
South Africa has the smallest margin when it comes to monthly rental versus mortgage payments and despite slightly higher interest rates and consumer price hikes, the outlook for the property market in 2022 remains healthy. And it still favours buyers expected to become homeowners for the first time.
The demand for property, particularly in the more affordable market segments, presents some attractive options for first-time buyers looking to realise their dream of becoming homeowners. Starting the house hunting process is of course incredibly exciting, leaving the most level-headed among us prone to a misstep or two.
The trouble is even the smallest errors can be costly for novice buyers which is why is pays to know how to steer clear of them from the get-go. And even experienced buyers may require some help in determining where they currently stand financially, and what they're in for when buying property.
It's essential to know exactly what you are able to afford, and what your credit rating is. Banks will only approve you for an amount you are able to repay, and credit ratings under 600 will not be accepted.
Keep the following in mind and avoid these big (and potentially costly) blunders:
1. Understand preapproval vs. Qualified Buyers Certificate
One thing that will help you stand out to sellers, estate agents and banks is a Qualified Buyers Certificate. This involves a more in-depth process than a preapproval and is executed by financial experts. Ooba Home Loans has found that potential home buyers with a Qualified Buyers Certificate increase their chances of being approved by over 90%.
A Preapproval is the simplest way to determine what you can afford and what your credit score is. A preapproval increases your chances of having offers accepted by sellers and allows you to make adjustments to your finances as needed. While a preapproval is useful in providing a clearer idea of where you're at financially, it doesn't guarantee that you'll be approved by the banks.
Simply put, a Qualified Buyers Certificate is a more robust version of a prequalification. It is conducted by a home finance expert who evaluates your affordability in much of the same way that the banks do. Documents are assessed, in-depth credit checks are performed, and your financial position is determined before you receive the certificate.
What makes a Qualified Buyers Certificate such a powerful secret weapon is that it mimics the steps a bank will take when analysing your finances once you've applied for a home loan... It is often conducted as a precursor to a home loan application and saves on approval times. Therefore, if you complete a prequalification and then apply for a Qualified Buyers Certificate, your application is already 25% complete.
2. Not finding the right estate agent for you
Chat to a few estate agents in your neighbourhood/s of choice to get an expert view of the area. Get a good idea of a suburb's potential, the pros and cons before you start house hunting. You don't want to move into your dream part of town only to discover persistent water issues. Partner with a reputable estate agent (or two) who understands your needs as a prospective buyer. A knowledgeable agent with a good track record can make all the difference to your homebuying experience.
3. Ignoring those Ts and Cs
Buying a home is one of the biggest financial decisions you're likely to make so it's the one time you want to get familiar with all those terms and conditions. What are your rights and responsibilities as a buyer? What happens if the seller reneges on a clause in your initial offer to purchase? Does the home you intend to buy come with a valid set of building plans? What are the conditions of your offer to purchase?
4. Not understanding the real costs of being a homeowner
It's not just your monthly bond repayments you have to budget for. It's important to get an exact handle on what you can expect to pay in rates, taxes, and municipal services, as well as any special levies in the case of sectional title properties. You also need to budget for insurance (household contents, structural, life) as well as the potentially numerous costs of maintaining your property. A large garden and a pool come with extra expenses.
5. Not being prepared
Doing research on home loans, bond originators, conveyancers and the role, costs, and requirements of each will only stand you in good stead when you're finally ready to take those first steps on the property ladder. It's never too early to start making sure that you're ready for home ownership by knowing your credit score and type of property you'd like to purchase in your price range.
6. Forgetting to do a close inspection
Take a closer look at your dream home before signing on the dotted line. Look for signs of rising damp, test light switches, taps and shower heads, open cupboards, get a roof inspector and ask the seller as many questions as you can think of. You can't do too many of these checks, and don't feel afraid to call in a second or third opinion if necessary.
7. Not having emergency savings
Unexpected costs and minor emergencies are inevitable as they are annoying. It's tempting to direct every bit of spare cash towards a huge deposit, but this just makes having to pay for a brand-new geyser on top of the electrician's call out fee more painful than it needs to be.
Author: Property 24 - Extracts
