Eight points to consider before buying property

Private Property South Africa
Cathy Nolan

1. Are you pre-qualified?

Getting pre-qualified with your lender simply means getting an idea of the price range you can afford. Your overall household debt should not be more than about 30 percent of your household’s total monthly income, and the bank will base its recommendation on your stated net monthly income. Note that, with a pre-qualification, your information is not verified and the loan that you pre-qualify for is not guaranteed. It helps greatly if you can put down a deposit before requesting a pre-qualification. In fact, in the current economic climate, most banks are insisting on this.

2. Have you done your homework?

You might find a home in a neighborhood that you’re not familiar with – which means that you’ll have to do a bit more homework. Try and find properties that were sold in that area within the last year. How does your home rank? Is it at the top of the price range? If so, it might be hard to resell. Is it average, or on the low end? If so, great – as the other home prices go up in value, they will pull your home’s value up as well. Find out about the schools. A good school district means that your neighborhood will always be valued by families, which is a great reason to purchase.

3. Are your expectations realistic?

You're about to spend a big amount of money – and no house is perfect. Understanding and remembering these two statements will help diffuse the negotiation and closing stages of the sale.

Emotions can run high for both buyers and sellers. Sellers often have loving memories and years of “sweat equity” in their homes. Understanding their motivations for selling will help you to empathise with them.

Always have your potential asset professionally inspected for defects before you make an offer to purchase. This will cost a few hundred rands, but it’s worth it. It’s the inspector’s job to find any problems with the house, which could cost you thousands to repair down the line.

4. How long do you plan to live in the home?

If you buy a home and then sell it after only a short time, you may end up paying money in. The value of your home might not have appreciated enough to cover your initial costs to buy the home and what it will cost you to sell the property.

The time that it takes to cover those costs depends on various economic factors. You should plan to stay in your home for at least four years to cover buying and selling costs.

5. Will the home suit your needs well into the future?

You need to think about what you need in a home to make it work for your lifestyle right now and then five years from now. You need to be sure that it suits your present and future needs. Having an idea of what your life plan is and what your real needs are will help you to find a home that works for you well into the future.

6. What can you honestly afford?

While it’s usually possible to find a bank that will grant you a bond, solid lenders are more skeptical if your credit history is not good. Generally, having only a couple of blemishes on a credit report will make you a good credit risk and could qualify you for lower interest rates. It is wise to avoid borrowing as much as you qualify for as it is always better not to stretch your financial boundaries. Rather be conservative and certain that you can cover your bond payment without being stretched financially.

7. Where will the money for the deposit and bond and transfer costs will come from?

Usually, home buyers need money for a deposit and bond and transfer costs. With today’s broad range of loan options, having money saved for a deposit is not always necessary – if you can prove to your bank that you are a good financial risk. If your credit record isn’t perfect but you have managed to save from 10 percent upwards for a deposit, you will still appear to be a very good financial risk.

8. What about the ongoing costs of home ownership?

Maintenance, improvements, taxes and insurance are all costs that will need to be added to your monthly household expenses. If you purchase a flat or a townhouse or buy into a secure estate, for instance, you have to pay monthly fees and levies.

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