How to prepare to buy a Home
How to prepare to buy a Home
Written by Matthew Saulez
So you’ve decided now’s the time, you’re done with rent, you’re sick of answering to a landlord and you are going to take the leap. You’re buying your very own home!
The route to buying your own piece of earth is one of preparation. Here are some essential steps to get you on your way to becoming a home owner.
1 Check your Credit
Definitely the first to buying a home is to check your credit. Unless you are fortunate enough to buy 100% cash you are going to need to apply for a bond, and banks like good credit. To check your credit you can get free credit report once per year with any of the major credit bureaus.
2 Clean up your Credit
Great! You’ve got a credit report. How’d it look? If the first word you said was “Eish” its probably not looking good… Don’t worry you can clean up on some of the errors. Try contact the Credit bereau to sort out some of your minor errors. This may increase your credit worthiness but not significantly if you have other major issues. From now on, make payments on time and in full, as soon as you have built a track record of paying your bills on time you’ll notice your credit worthiness sky rocket.
3 What can you afford?
The next step, and obviously very important, is to figure out what property you can afford. You can do a quick calculation to have a roughly understanding of what loan you will be approved for.
Use the following calculation to find what you could qualify for:
((Basic Income) x 0.3) / (Rate Factor) x 1000 = Qualifying Amount
To calculate your potential monthly repayments, us the following formula:
(Qualifying Amount)/1000 x (Rate Factor) = Bond Repayments
These are great formulas to do at home to quickly find out what you may qualify for however I highly recommend you chat to a BOND ORIGINATOR to get a better understanding as they will take into account your expenses and credit record.
4 Enquire with a Bond Originator.
When shopping for real estate a stamp of pre-approval will be a great feather in your cap. As when it comes down to putting in an offer (subject to bond approval) sellers will take you more seriously. Please remember a pre-approval does not typically mean you will be granted the bond, many other factors will come into play when actually applying for a bond. For example: the property value.
Being pre-approved will also greatly speed up the process of getting the bond. At Real Estate Company we highly recommend the services of Durban Property Finance, whose services are absolutely free to you. DPF will help you get the lowest possible interest rate by applying at all the banks and making them compete to give you the bond.
5 Save for a DEPOSIT and other expenses!
Don’t forget that all important DEPOSIT. Typically the banks want to see you commit 10-20% of the purchase price with a deposit. However, in some cases the banks may require even more.
On top of the Down Payment there is myriad of other expenses. These include:
· Transfer Costs
· Transfer Duty / VAT
· Bond Registration Costs
· Postage and Petty Fees
Therefore you need a sufficient cash reserve to pay both the Deposit and all the transfer fees.
6 Chill Out!
Do not make any major financial moves. Do not:
· Switch jobs, just hang in there
· Take out any news loans or further credit.
· Buy a car for your “new garage”
It is of paramount importance that your financial circumstances do not chance as the Bank will view this as added risk to them.
7 Know what you want.
Make a list of everything you would like the perfect home to have, within reason of your budget of course: number of bedrooms, a pool, how many garages, views, area, estate living, free standing, pet friendly and on and on. Then next to that list make another list of absolute non-negotiables, the things you can’t live without. With this list of non-negotiables will you be able to focus your search for what you really want or need and all the rest if the property has them will be added bonuses.
8 Browse Online
Last but not least, look for property! Now that you are armed with the necessary preparation it is time for you to go find that dream home. Look online and compare properties. Another good idea is to contact a local agent who can keep an eye out for property which has not even hit the market yet and you can get the first opportunity to view them.
If you are ready to buy and would like access to the latest property either contact Matthew or Brady (the Property Bros.) at Real Estate Company for assistance. We are more than happy to help.