How to find the right home which you can afford

Regardless of the type of resolution, whether emotional, mental, physical or financial, without a solid plan in place and some direction, many resolutions fall by the wayside early in the year. However, says Adrian Goslett, CEO of Re/Max of southern Africa, determining clear goals and setting a plan of execution in place will help to ensure that resolutions and goals become a reality this year.
He notes that it is especially important for people who intend to become home-owners during 2015 to have a plan of action that they can focus on to bring them closer to achieving their dream of owning their own property.
According to Goslett, there are six key essentials which potential home owners should bear in mind when putting their homeownership plan together.

Save, save, save

There is no secret formula when it comes to getting ready to purchase a property, but one of the vital aspects of home-buying readiness is having enough money saved up to cover the deposit requirements and other costs associated with buying a property.
Although it is possible to achieve a 100% home loan, most financial institutions will require the buyer to place a deposit of from 10 to 30 per cent of the purchase price of the property to secure approval.
What this essentially means is that a buyer will require a minimum deposit of around R100 000 on a property that costs R1 million, bearing in mind that it does not include other expenses such as transfer costs and attorney fees.
The other advantage of having a deposit, besides vastly improving the applicant’s chances of approval, is the fact that it can positively influence the interest rate provided by the bank.
“It may not be easy, but potential buyers will need to curb their spending and cut back on any non-essential expenditure so that they can put as much money aside as possible.
Even a few hundred rand a month can make a difference and bring them a step closer to the goal of owning a property, provided they are consistent and stick to the plan,” Goslett advises.

Pay off debt

Affordability is a key factor that banks consider when deciding to grant finance to a potential buyer.
This is largely measured by a person’s debt-to-income ratio and the percentage of expendable cash at his or her disposal. Generally South African consumers have high debt levels which puts pressure on their affordability ratios.
“For those who are eager to get their foot into the property market door, paying down debt where possible is essential, along with avoiding purchasing any large items such as a car for example,” advises Goslett.
“It is better to refrain from any new credit in order to ensure that debt-to-income ratios remain within a favourable range.
Regardless of whether a new item is purchased or not, an enquiry by a potential lender could negatively affect a buyer’s score, so it is best not to apply at all.”

Maintain a good credit score

The majority of first-time buyers will be reliant on a financial institution for a bond to purchase a property.
Therefore it is vital for consumers wanting to obtain finance, to keep their credit record well maintained and favourable.
Although the credit amnesty bill removed defaults from certain consumer’s credit records, this does not mean that the credit score is any less important to maintain.
A buyer’s credit score will have to be a minimum of 750 in order to be successful in an application for finance.
A potential buyer’s credit score will also be taken into account when determining the interest rate that the bank is willing to provide to the buyer.
“Consumers are entitled to a free annual credit report from most credit bureaus, so they will be able to check their score before they apply to the bank.
The new year is an excellent opportunity to revise your credit score and see where it can be improved,” says Goslett

Know what you qualify for

The bank, or a bond origination company such as Betterbond, will be able to assess a potential buyer’s finances and give him an idea of what he qualifies for before he applies for a bond.
This will provide the buyer with some much-needed guidance as to what they can afford and commit to over the term of the home loan.
“It is important that buyers consider affordability in terms of what they can sustain over the term of the loan, which includes expenses such as utility costs and maintaining the property.
Resources are available to buyers to help them determine the figure and precisely assess their financial situation. These resources include financial advisers, banks and bond origination companies.
Ideally, bond repayments should not exceed 30 per cent of the buyer’s total monthly expenses,” Goslett explains.

Choose to work with the right estate agent

The home buying experience will be largely determined by the estate agent with whom the buyer chooses to work, so make sure the selected agent is right for you.
When looking for an agent it is important that buyers keep a few things in mind during the selection process, such as the brand the agent represents. “A reputable real estate brand will enjoy a large network of professionals at hand to assist where possible,” says Goslett.
“Another thing to keep in mind is that agents work in specific areas, so select an agent who has solid working knowledge of the area in which you are interested in purchasing.
The buyer must feel comfortable with the agent and they need to be able to communicate effectively with each other so that no time is wasted by the agent showing the buyer properties that don’t meet the criteria. The buyer is well within his right to request that the agent provide him with recent testimonials and references from happy clients.”

Find the right home for you

Look at your lifestyle and future plans to determine what criteria are required for the perfect home.
Where possible, potential buyers should be researching and finding out as much information as possible about the market and the properties available to them. “Knowledge about the property market will provide buyers with insight into the areas they want to live in and the type of property that will best suit their needs.
This will greatly narrow the search and provide them with useful information to make an informed decision. Knowledge is the key to success when it comes to determining a good property investment from a bad one,” Goslett concludes.