With this comprehensive guide, you’ll know exactly what to expect every step of the road that leads to your very own front door.
Buying your first home is one of the most momentous milestones in your life. But, as exciting as the prospect of becoming a homeowner is, there are a lot of things to consider, not least of all getting a bond in place so you can finance your dream home. That’s why we’ve created this step-by-step guide to help first-time buyers get onto the property ladder.
The first-time buyers guide: Where to begin
Of course, the first issue to consider, before you even begin the house hunt, is to determine what you can afford.
ooba Home Loans can help with their free, online tool the Bond Indicator, which will prequalify you for buying a home, meaning you get your credit score, a solid idea of what you can afford, and a certificate of prequalification that you can show to estate agents.
The importance of your credit score
The credit score is a three-digit number between 000 and 999. A score of 600+ will give you a fair chance of home loan approval, although this may vary according to which bank you use.
If your credit score isn’t high enough, don’t give up just yet. There are ways you can improve your credit score, such as by clearing debts, and limiting your use of credit.
You’ve found your dream home. What next?
The first step is to sign the offer to purchase, an agreement between you and the home seller that stipulates the conditions which need to be met before the home sale can commence.
Here’s where it can be helpful to have an estate agent or attorney look over the agreement with you to ensure you haven’t missed anything important.
You’ll want to make sure the agreement includes an obligation on the part of the seller to conduct a home inspection, and inform the buyer of any defects.
When you sign the offer to purchase, you’ll normally stipulate conditions that need to be fulfilled before you can complete the purchase, such as the sale of your current home, or the granting of a mortgage. This gives you time to acquire the necessary funding.
Of course, for the seller, this part of the agreement can be a cause of frustration, as the process will remain in limbo while they wait for these suspensive conditions to be fulfilled, which can take a while.
This conundrum led to the introduction of the 72-hour clause, which entitles the seller to the following:
- They can continue to market the property, even after accepting an offer to purchase from an interested buyer.
- If they receive a better offer, they can provide the original buyer with written notice, informing them that they’ll have to waive the suspensive conditions and go ahead with the offer to purchase within 72 hours, or the offer to purchase will be rendered null and void, freeing the seller to sign a deal with the new buyer.
It’s important for you to be aware of the 72-hour clause, and to look out for it when investigating the terms of the offer to purchase. Many buyers go ahead and sign an agreement with a seller, believing they’ll have ample time to get their affairs in order, but if the seller invokes the clause, you’re suddenly left with 72 hours in which to acquire the necessary funding or sell your existing property, so that you don’t lose out on the home.
Financing the home purchase
Once the offer to purchase has been made, you need to set about acquiring a home loan, as well as gathering funds for a deposit.
Applying to a bank for a home loan is probably the most important part of the process. You can make it easier by using a home loan comparison service such as ooba Home Loans, who will apply to multiple banks on your behalf, Since different banks have different lending criteria, doing it this way gives you the best chance of finding a good home loan deal with favourable interest rates.
The higher your deposit on the home, the better your chance of having your home loan approved, and the lower your interest rate. A deposit of 10% of the purchase price is usually required, but the higher you can go, the better.
Of course, for many first time buyers, gathering the funds for a deposit may be difficult. Thankfully, many banks are offering 100% home loans, meaning home loans that don’t require a deposit. This is a good option to have, especially for young home buyers.
Your home loan is approved. Now what?
Home loan approval is a big weight off your shoulders, since you now know that you can fund the home purchase. However, it’s not the end of the home-buying process. A number of legal procedures are still required.
For example, the bank will appoint a bond attorney who will draw up documents for the purchaser to sign. Meanwhile, the seller appoints a conveyancing attorney who takes care of the transfer of property process (transferring the property to your name).
The conveyancing attorney charges you for the transfer of property, and the bond attorney charges fees for the registration of the bond.
The fees you’ll have to pay depend on the value of the property. You can use ooba Home Loans’ Transfer Cost Calculator to determine what the bond registration and transfer fees will likely be.
If the property is valued at more than R1 000 000 (valid for March 2020 to February 2021), you’ll also need to pay transfer duty to SARS, which is a kind of tax.
Receiving the keys to your brand new home
Don’t be intimidated by the various legal processes. Take our First-Time Home Buyer’s Guide with you for support every step along the way. And remember, keep your eye on the prize; the handing over of the keys to your brand new home.
If you’re a first-time home buyer with your eye on your dream home, remember that ooba Home Loans offers a range of tools that make the home buying process easier. Start with their bond calculator; then use the ooba Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.
Article Source: https://www.ooba.co.za/resources/first-time-home-buyers-guide/