If you feel like you’re ready to buy your first home, congratulations! It is a daunting and scary time as there’s a lot you need to consider. You’re going to be thinking about your finances in ways you probably haven’t before. Suddenly you need to be aware of your credit score, think about applying for bonds and start saving for a deposit. It might be a good idea to read some law guides around buying and selling a house, just to be sure of what you need to know.
You’re going to need to think through every step of the process carefully. Buying a house, especially your first one, is a huge decision which is probably going to affect the rest of your life and your financial future. Make sure you’re ready and take some time to properly consider all of your options. Be sure you can afford a bond and all the other extras which you might not even be 100% certain about right now.
Here are some tips to help you make what’s probably going to be one of the biggest purchases of your life.
Take your time
It can be difficult and time-consuming finding the right home. You might have certain ideas about the kind of home you absolutely have to have. You know where you want to live and what you want to pay for it. But the reality is these expectations often don’t coexist. It can be tough to find a home which ticks off all the items on your checklist. But your dream house is out there, so keep calm and keep house hunting and eventually you’ll find what you’ve been looking for. This is one of the biggest expenses of your life, so you’ll need to be sure you’re spending all that money on the right home.
Don’t pay more than you’re able to afford
As you start this journey, many people will encourage you to buy the biggest home in the best possible neighbourhood. But what you need to keep in mind is that buying a home comes with additional expenses like insurance, maintenance and rates and taxes, and so much more. Make sure you’re only looking at homes which you’re sure you’ll be able to afford.
Check your credit scores
Did you know that you’re entitled to a free credit check every year? Make sure that you take advantage of this whenever necessary. When you’re applying for a bond, the banks will be looking at your credit scores. So you might as well know what they’ll be looking at. If your credit score isn’t looking great, this is your chance to try and improve it as soon as you possibly can. And there might be inaccuracies which you need to know about and rectify. There are a number of things which would negatively impact your credit record – opening too many accounts, numerous credit queries and only paying the minimum required payment. All of these could result in your credit score being impacted and could scare away the banks.
How much debt do you have?
Banks are going to check how much disposable income you have. In order for you to have more disposable income, you’re going to have to pay off your debt. The banks are going to work out your debt to income ratio and use that to calculate your affordability. Having a low debt to income ratio will benefit you as it will increase the chances of you being approved for a higher bond amount. But, a word of warning, just because a bank approves you for a certain amount, doesn’t mean you should spend that entire amount, especially if you don’t feel comfortable paying that amount of money each month.
Save for as big a deposit as you can manage
Easier said than done, right? In these tough economic times, many people are not able to save money. But it’s important when you’re buying a home that you do have a deposit which you can put down. Some banks won’t require a deposit but many do. And the good news is that, with a deposit, you’ll be able to pay off your home faster as you’ll spend less time paying off the interest. Make sure to save as much as you possibly can for a deposit, at least 10% to 20%. According to recent statistics, first-time home buyers are putting down deposits of 12.3%, making the average deposit R92 000. So, before you buy a home make sure you have at least this amount, and some more money for good measure, saved up.
Remember, there’s nothing wrong with renting as it comes with its own advantages. But many people do want to own their own homes. Buying a home is a big responsibility, emotionally and financially. Be sure you’re ready. If