Here’s what you will need to do to get yourself financially ready to take on the financial commitment of a mortgage.
Make sure your credit score is healthy
Your credit score lets banks know about how well (or badly) you manage your debt. A good credit score improves your chances of getting a home loan.
How to build up your credit score:
• Pay all your bills on time, every time
• Clear as much of your debt before applying for a home loan.
• If you don’t have one, you should apply for a credit card as this aids your score.
• Check your status by getting a credit report from one of the credit bureaux.
Save for a deposit
Having a deposit saved makes you more attractive to sellers, agents and banks.
Why you should save for a deposit.
• Higher chance of getting your bond approved.
• Smaller bond, amount owed is decreased so you save on interest paid over the loan term.
• A deposit means your bond repayments will be lower.
• You’re in a better position to negotiate an interest rate, since there is lower risk for the bank.
Assess your affordability
Before you start looking for a property you need to have an idea of what you will be able to afford.
You can use an affordability calculator to work out what size mortgage you can qualify for.
The affordability calculator will consider your net income (income after tax and deductions), your total expenses, the interest rate and the bond repayment period.
TIP: As a general rule, your monthly bond repayment should not exceed 30% of your gross monthly income.
Beware the additional costs!
There are a number of additional costs that are incurred when buying and taking ownership of a house and these may come as a shock to a first time buyer.
Have you budgeted for these?
• Additional buying costs:
Bond initiation fee, transfer duty, bond registration costs, conveyancing fees
• Additional home ownership costs:
Bond repayments, Homeowner’s Insurance, municipal rates and taxes, water and electricity, levies (if sectional title), maintenance, security
Home loan pre-qualification
Why you should get prequalified
• Takes away some of the uncertainty in your home search since it gives you a good idea of what you can afford.
• It isn’t a guarantee that you bond will be approved but it gives you a pretty good idea.
• Sellers and agents see you as a serious buyer who can afford the property
How home loan pre-qualification works
Getting prequalified is the same as applying for a home loan, so you would need to submit all the relevant documentation to the bank.
Once your application is approved, you will receive a prequalification certificate which shows the home loan amount you have been pre-approved for.
Step by step guide: