First Time Buyer’s GuideJanuary 22, 2018
Purchasing a home is something that most adults aspire to do. However, the actual process, steps, and financials required are often not openly discussed, leaving you in the dark.
It’s important to be familiar with what is required from you and what precautions you can take, to ensure that you qualify for a home loan.
By reading through this first time home buyers guide, you’ll have an idea of what’s in store for you.
Know your Needs First
Before you begin house hunting, it’s important to know what you’re looking for in your home by making a personal checklist. This list should incorporate the needs of each member of the household. You should ask yourself:
- How many bedrooms and bathrooms are required?
- Do I need off street parking?
- Do I need to be close to public transport?
- Do I have animals that require a big garden?
- Do I want to be close to work, schools or other amenities?
Additionally, you should also make a list of your new expenses that are going to come your way. Besides paying your monthly bond, you’re also going to have to pay for:
- Rates or levies
- Utility bills
- Repairs or maintenance
- Monthly living expenses
In doing so, you’ll be able to estimate your budget required to own your home.
Much Ado About Mortgages
Mortgage technically means pledge or promise, as in, you ‘promise’ your property as security to the lender, should you not be able to pay back the loan. Affordability of a mortgage shouldn’t be more than 25%-30% of your regular family income, before tax deductions.
Using a BondBuddy’s free online calculators, you can determine how much you can afford to spend on a home using your gross monthly income.
Home Ownership in South Africa
The paperwork involved when purchasing a property is called a title deed. This document specifies the location and size of the property and the particulars of the owner.
The majority of first time home buyers will purchase a freehold ownership. But, just like there are different types of properties to buy, there are several types of home ownerships available to purchase, each one with their own legalities:
- Freehold – This title means that you own a piece of land, with everything on it. You’re required to pay rates to the municipality based on the value of the land and buildings.
- Sectional Title – If you’re looking to purchase a townhouse or flat, this is the title you’ll have. It means that you own the inside of the building, while the exterior and the land it’s on belongs to a Body Corporate, which is made up of the unit owners.
- 99 Year Leasehold – In this case, you never own the property outright. Instead, you lease the land from the owner for a period of 99 years. If you are buying the land from an existing owner and the real owner is not government or a municipality, you’ll buy what is left in years on the lease.
- Share Block – This applies to a small block of flats which is registered under one company’s name. Purchaser’s become shareholders in the company and in return, can occupy a unit.
First time home buyers are often thrown off course at surprise information. That’s why it’s important to remember that with every home bought, there are additional expenses to consider:
- Transfer costs
- Registration costs
- Transfer Duty costs
- FICA fees
- Posts and Petties
- Electronic instruction fees
These amounts depend on how much your home is worth. And it’s also very important to not forget about the interest rates you’ll be paying back too. As BondBuddy offers a transparent service, your lender will be happy to provide you with a breakdown of these costs.
On Your Way to Home Ownership
Once you know how much your loan can be, you can go and search for a home that meets your criteria and budget. Be sure to use a reputable estate agent, as they act as the liaison between the you and the seller.
Remember, these prices are negotiable, so don’t be afraid to make recommendations of your own to the estate agent. And, be sure to have a professional home inspection company review the property for you to ensure it’s in good condition.
Putting in an Offer
Before you sign anything for the property, be sure to visit it several times and ask as many questions as you like to the estate agent. It’s a huge investment and you wouldn’t want to find any defects when it’s too late.
Once you know that you’ve found ‘the one’, the estate agent will draw up an ‘Offer to Purchase’ document, which contains the:
- Terms and conditions of the sale
- Purchase price
- Payment terms
- Date of occupation
It also includes the occupational rent terms, which is a monthly amount paid by the seller to the purchaser, should they wish to stay longer on the property, after the registration of sale.
If you plan to take out a home loan, the “Offer to Purchase” must include a condition that the sale is subject to bond approval being obtained within a realistic amount of time i.e. 7 – 10 working days. Once you have confirmation that your loan has been approved, you must notify the estate agent immediately to ensure that your offer becomes unconditional.
This condition is very important, because if you are not able to secure finance, the “Offer to Purchase” will terminate and become null and void, and neither you nor the buyer will be liable to pay any costs or penalties.
Applying for a Home Loan
It’s important to disclose your true state of affairs, so that the lender can make a true assessment of you. Additionally, you must remember that when you choose a reputable lender, they must:
- Assign an independent assessor to your property for inspection
- Comply with the National Credit Act
- Encourage you to take out building insurance and mortgage protection cover
The Final Steps
Once all the conditions of the contract have been met and the deposit paid, the next process is the transfer of the property into your name and the registration of the Mortgage Bond at the Deeds Office. The Conveyancing Attorneys handle this part of the loan process and will contact you when the documents are ready to be signed.
The seller must provide you with an Electrical Clearance Certificate, as well as a document stating that the property is pest-free. These conditions may vary depending on which province your property is situated in.
This process can take up to 10 weeks without delays. But, once it’s done, the property is legally in your name, which means from that date onwards, you are responsible for the payments and maintenance.