If your credit record isn’t as shiny as you’d expected, don’t lose hope. Picture: Olya Kobruseva/Pexels
Buying your first home is a huge and exciting step. Done right, it can also be an excellent investment that sets the stage for a more secure financial future.
So how do you make sure you’ve got all your ducks in a row for a successful purchase? According to David Jacobs, Gauteng Regional Sales Manager for the Rawson Property Group, the secret lies in proper preparation.
Check your credit report
“A good credit report is essential if you’re going to be applying for home finance,” says Jacobs. “It shows lenders how responsible you are and how well you handle debt.”
There are a lot of websites that claim to provide free access to credit reports online, but Jacobs warns that these may not be as detailed as official versions. For a more thorough report on your credit history, he recommends approaching a bond originator who will apply through official channels on your behalf, free of charge.
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“A bond originator can also help you interpret the data you get back, and offer advice on remedying any black marks,” says Jacobs.
Get in touch with a bond originator at IOLProperty.
Polish your financial profile
If your credit record isn’t as shiny as you’d expected, don’t lose hope – there’s plenty you can do to improve it with a little time and effort.
“Settling any overdue accounts is the first step,” says Jacobs. “After that, focus on consolidating and reducing overall debt and paying the remaining essentials on time, every time.”
Lenders don’t just look at how much you owe, or how well you meet payment deadlines, however. They also like to see predictability and stability in your financial background.
“Try not to shift money between bank accounts too much, make any large or unusual purchases, or change jobs before making a property purchase,” says Jacobs.
Work out what you can afford
Before you head out on your house hunt, you need to know what price range you can afford to look at. Using an online affordability calculator can give you a ballpark idea of the loan size you might qualify for. Getting prequalified by a bond originator is even better.
However, Jacobs cautions against setting your budget based on what you’d qualify for, alone.
“Buying a property comes with a lot of upfront costs like a deposit, attorneys’ fees and transfer taxes,” he says. “Homeownership also has ongoing costs like rates, taxes, maintenance and insurance. It’s essential to consider all these expenses when setting your price limits to ensure your post-purchase monthly budget still has enough wiggle room to handle interest rate fluctuations and unexpected expenses.”
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Save up
Between bond costs and transfer costs, the average R1million property purchase can rack up over R50k in fees. While it’s possible to finance some of these expenses through your bond, Jacobs says it’s almost always financially smarter to pay upfront, along with a good deposit.
“Being able to put down a good deposit makes it easier to get bond approval, and almost always results in better interest rates,” he says. “The lower your total bond amount, the lower your repayments will be, and the less interest you’ll pay over the lifetime of your loan, too. That can have a very real impact on your financial future.”
Understand what you’re getting into
Buying your first home is almost certainly the biggest financial decision you’ve made so far. That can be very overwhelming if you don’t know what you’re supposed to do, or what you’re getting into. Jacobs recommends all buyers take some time to learn as much as possible about the purchase process as well as current market trends and conditions.
“Arm yourself with information,” he says. “The more you know, the easier it is to make smart choices and avoid the most common mistakes and disappointments.”
Get prequalified
Getting prequalified for a bond isn’t just a useful tool when figuring out your affordability. It also gives you an important leg up on other buyers when making an offer to purchase.
“Since most offers are subject to bond approval, sellers tend to give preference to buyers who are prequalified,” says Jacobs. “It’s an easy way to beat the competition if you’re up against other bidders on your dream home.”
Find a real estate agent
No amount of preparation can ever compete with the hands-on knowledge and experience of a good real estate agent. Jacobs urges buyers not to fall into the trap of thinking agents are for sellers, only.
“Real estate agents can add extraordinary value to buyers’ experiences,” he says. “They’re property experts, they’re neighbourhood experts, and they know the sales process backwards. Their advice can be invaluable not only in finding and weighing up potential purchases but also in making smart decisions throughout your property journey.”
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