Buying a House
Your mortgage is likely to be the biggest debt you’ll ever take on, and so it also needs to be the one you consider most carefully.
It can be overwhelming knowing where to start – luckily, it all begins with you.
The First Time Buyer’s Guide
Buying your first home can be a daunting process, but we’ve narrowed the process down to a handful of basic steps. While this is not a comprehensive guide to buying your home, it will put you well on your way to getting a property of your own.
Your Credit Score
Your credit score is the very first thing you’ll need to consider before deciding to buy your home, as it will affect how easily you get accepted for the loan, what sort of interest rates you’ll get and ultimately how much you’ll be loaned.
The better your credit score is, the more money you’ll save in interest rates alone.
Once you know what your credit rating is, you can then look at your affordability, which is the amount you can afford to spend on a mortgage after all of your other expenses are considered.
When you know what you can afford, you won’t waste time on looking at properties that are outside of your budget.
Remember, when you buy a home, it’s not just the mortgage that you need to consider. You’ll also need to budget for levies, rates, insurance, taxes and property maintenance. Initial purchasing costs, such as bond registration fees and transfer costs can also quickly add up.
Top Tip:
There are many different ways to determine the value of a property. Comparing the property you’re interested in with others in the area will help guide you with regards to the property’s value.
Affordability
Once you’ve decided what type of property you want, you’ll then need to start calculating how much you can afford. You can do this by adding up:
- The rates and levies
- Utilities
- Property maintenance and repairs
- Insurance
- Your monthly living costs.
Once you’ve weighed these costs against your income, you can then decide how much you can afford to spend on your home loan each month. Remember, you shouldn’t spend more than 30% of your family income, before tax, on your home loan.
Don’t forget the extra costs
Buying a home isn’t just about paying off the mortgage – there are a range of fees you need to cover right at the start. These include:
- Transfer costs
- Registration costs
- The FICA fees
- Transfer duty costs
- Posts and Petties
- Electronic instruction fees.
The total costs involved will depend on the value of your home. Keep in mind, you’ll also have the interest rates to pay back. A lender should be able to provide you with a breakdown of all the costs involved when you’re applying for the loan.
Top Tips:
Use a home loan free online calculator – like the one from SA Home Loans (https://www.sahomeloans.com/calculator) – to work out how much you can spend on your home.
Have a professional home inspection company visit the property to conduct a review so that you are aware of the condition of the property before you make a purchase.
Putting in your Offer
This is a big purchase so visit the property as often as you need to in order to decide that you’ll be happy with it for the next 25 years at least. Once you decide to make the offer, it’s up to the estate agent to draw up the offer to purchase agreement. This includes:
- The sale terms and conditions
- The purchase price
- The payment terms
- The date of occupation.
The offer to purchase will also usually contain a condition that the sale is subject to bond approval within a realistic time frame. This is for those instances where you’re waiting to be approved for a home loan. Only once this loan has been approved will the offer then become unconditional.
Apply for a Home Loan
Once you’ve found your dream home, you’ll then need to apply for a loan.
Completing the Sale
After your loan has been approved, the deposit paid and the contract conditions have been met, the property will then be transferred into your name. The Mortgage Bond will also need to be registered at the Deeds Office. It’s up to a conveyancing attorney to complete this part of the process and they will get in touch with you when the documents need to be signed.
At this point, you’ll need to obtain an Electrical Clearance Certificate from the seller.
The total process can take as long as 10 weeks – and longer in the event that there are delays. After this, the property will be registered in your name.
Home-Buyer’s Dictionary
- Title Deed: A document that specifies the size and location of the property, as well as the details of the owner.
- Freehold: This title transfers ownership of a piece of land, including everything on the land. The owner is required to pay rates based on the value of the land and the buildings.
- Sectional Title: This type of title comes with a townhouse or flat. It transfers ownership of the property itself (the inside of the building), while the land continues to remain in the ownership of the body corporate.
- 99-Year Leasehold: The ownership of the property is never transferred to the purchaser – instead, the individual is leased the land for 99 years.
- Share Block: This type of purchase is applicable to a small block of flats that is registered under the name of one company. The purchaser then becomes one of the company’s shareholders and can then occupy a unit.