3 Tips to remember when buying your first home

With the historically low-interest rates in South Africa, currently, it is a very attractive time for especially first-time homebuyers to enter the market as the bond repayment and the monthly rental is very close to each other. The following are important steps to assist all prospective buyers:

• Know your credit status

When you apply for a home loan, the banks will first do a thorough check on your credit status to ensure that you are responsible for the repayments of your monthly instalments for all your accounts.  A good credit record or profile is built up over a period of time by paying your bills diligently on time. Although the different banks or institutions may differ regarding their rules, it will be more difficult if you have crossed swords by not repaying on time – keep to their rules.

Some people prefer not to have any accounts at stores, but if you are one of them, open an account or a credit card and diligently pay it back to build up a credit score – this will help when you decide to apply for a bond.

• Save for a deposit

Banks have different criteria for potential home buyers when it comes to deposits, so ensure that you are aware of your own bank’s stipulations when deciding to buy your own home. By having a sizeable deposit when applying for a loan, the banks will see this as a very good sign and it will boost the buyer’s chances for a loan.

All applicants for a home loan get an affordability score from the banks and they all have their own ways to determine it – however, a sizeable deposit will boost this. Furthermore, the monthly instalments will then be lower as well and it can be a good saving in the long run.

Although it is a challenge to save towards a deposit, it is better and thus a monthly budget is a good starting point to determine how much you can save for the deposit. You will have to make cutbacks on certain things, but in the long run, the higher deposit will save you on your instalments.

• How much can you afford?

Banks and companies like ooba have affordability calculators and that is the best place to start. Normally you can just add all the numbers they ask like salary after-tax, total monthly expenses, current interest rate and the term that you are comfortable with to pay back the amount into it and the calculator will work out the total loan amount that you can afford.

To make it easier for the prospective buyer, he/she can allocate a third of their income as a general rule to bond repayments. Again, the banks and financial institutions specialising in home loans have excellent calculators to ease this process for you – it puts the monthly loan instalments and the interest added over the loan period for you. This will also determine one’s affordability level through the calculation of your income against your monthly expenses and bond variables that may arise.

Your bank and other financial institutions specialising in home loans are the first and best place to start on your exciting path to your dream home – they want to help you!!!!!!