What to be aware of when buying your first home
Buying a house is the first step on the property ladder. This will the biggest investment you will ever make but people often incorrectly make this important decision based on emotion. Firstly, check out your credit score and your affordability. Determine your credit status because this determines your risk for the bank and your risk determines your interest rate. Your credit score will let you know how much negotiation power you will have with the bank manager in the home loans department at the bank. Then, find out your buying power.
The banks normally look at 30% of your income. However, if you have too much debt the bank will lower your interest rate which will negatively affect your affordability. This is all a direct contrast to what the National Credit Act prescribes. To work out how much your re-payments will be divide or multiply your income by 30%. That is your affordability test. You are looking at your credit profile and affordability test to see whether you will be able to afford the deposit.
This helps you to improve your credit profile and your subsequent risk to the the bank which can help you negotiate a lower interest rate.Buying a home is a long process and does not take place overnight. Make sure a professional can assit you to secure your new home and determine your timeline to prevent any delays.
The normal timeline of events before you buy your home include:
- You submit an offer to the seller
- The seller accepts the offer in about three days.
- You get all your paperwork together such as bank statements, proof of income etc. which gets sent either to a bond consultant or directly to the bank.
- It takes 10-21 days to get your bond approved.
- It takes another 14 days to get the instructions about the bond sent to the attorney. The bond attorney and the transfer attorney will work together. In that time, they have to prepare your transfer documents, apply to the Municipality for rates and taxes and they have got to get your bond documents signed.
- Then, they have to send it back to the bank again. The bank will have a lead time of six-10 days to ensure that all the paperwork is in place. There is also a cancellation attorney involved because they have to attend to the cancellation of an existing bond of a seller.
- This all goes to the Deeds Office which has a turnaround time of about 10-14 days.
Now you are already looking at a total of 62 days, which about four months ago when you first submitted the offer to purchase the property and made an offer to move in by the 1st of the month, you were not aware of the following delays.
Rather provide for a specific date when you are moving.