Resource (read the full article): 10 Essential Tips for First-Time Homebuyers in South Africa (wisemove.co.za)
Buying your first home is an exciting milestone, but the associated administrative tasks can be overwhelming. Amidst a cost-of-living crisis, South Africans are feeling the pinch, but there is good news. Leading bond originators report a 4.2% increase in home loan applications in the second quarter of 2024, indicating a positive trend.
Preparedness is key to navigating the property-purchasing process. If you’re a first-time buyer, here are some essential considerations before you sign on the dotted line.
1. Assess Your Credit Score and Budget
Before diving into the home-buying process, evaluate your financial health. Review your debts, savings, and overall budget to determine what you can afford. Your credit score is crucial in securing a home loan, as it indicates your financial reliability to banks. Most banks offer free credit score checks, and you are entitled to one free credit report annually. If you lack a credit history, consider applying for a credit card or a vehicle loan, ensuring you meet repayment deadlines.
2. Save for a Deposit
Saving for a deposit is a vital step in the home-buying journey. Banks usually require a substantial deposit to demonstrate your commitment. Typically, aim to save at least 10% of the purchase price. Remember, the cost of buying a home extends beyond the purchase price to include other hidden expenses.
3. Obtain a Pre-Approved Bond
Securing a pre-approved bond before house hunting helps set realistic expectations. It strengthens your bargaining power and reassures the seller of your financial capability. You can apply for pre-approval through your bank or a bond originator.
4. Choose the Right Location
Research your desired neighborhood thoroughly. Understand local market trends and ensure the sale price aligns with the area’s average. Consider the community’s suitability for your lifestyle, including transport options, schools, crime rates, and nearby amenities. Remember, while you can change aspects of a property, you cannot change its location.
5. Keep House Plans Ready
Most banks require house plans before approving a mortgage. Ensure that the approved plans match the property’s structure, including separate structures like garages and cottages. This step is crucial, especially if you are buying a home off-plan, as it helps banks assess the property’s value accurately.
6. Hire a Trustworthy Agent
A knowledgeable real estate agent can be invaluable. They schedule viewings, negotiate on your behalf, and help you understand the offer-to-purchase agreement. Choose an agent you trust, who has your best interests at heart.
7. Insist on a Home Inspection
Before finalizing your purchase, have a professional inspect the home for defects. In South African real estate, sale agreements often include a ‘voetstoots’ clause, where the buyer accepts the property as-is. However, both the buyer and seller must complete a disclosure form listing all identified defects, protecting against disputes over hidden defects.
8. Account for Closing and Hidden Costs
Buying a home involves several hidden costs, such as bond registration, property transfer fees, levies, and rates and taxes. Property transfer fees, payable to SARS within six months of transfer, can be substantial. If the seller is VAT registered, you will pay VAT instead of transfer duty.
9. Consider Mortgage Terms and Resale Value
Opting for a shorter mortgage term can reduce overall costs, despite higher monthly payments. Building equity is a significant advantage of homeownership. Additionally, consider the future resale value of your property and look for features that will appeal to future buyers.
10. Prepare for Bidding Wars
In a competitive market, be prepared for bidding wars. Stay calm, stick to your budget, and be ready to compromise. Flexibility is crucial in navigating the unpredictable home-buying process.
Final Thoughts
If you’re ready to take the plunge into homeownership, now is the time to act. By following these tips and staying prepared, you can confidently embark on your journey to buying your first home.