Finance 101 for buying a new home

BUYING a house is the single largest financial decision most people make in their lives.

To help buyers get it right the first time, insurance group Hollard shared some advice on where to start when house hunting.

‘You will most likely need to take out a home loan with a bank to buy the house, and that comes with a long list of responsibilities and legalities that one needs to consider. ‘Right at the top of the list is affordability.

Make sure you can service your loan every month until the debt is paid along with all the other ongoing expenses that come with property ownership.

‘With the right checks and balances in place, you can enjoy this new chapter in your life with your budget and sanity intact.

Check your credit record

Every consumer that has any form of credit – a personal loan from a bank, credit cards, cellphone account and store account has a credit report that is compiled by a credit bureau.

TransUnion provides a helpful consumer service where you can obtain your personal credit record and know exactly if there are any adverse reports against you.

Manage your credit record

Always pay the amount due on every one of your accounts in full and on time without fail. Also, do not max all your credit limits and avoid applying for too much credit.

Keep a healthy portfolio of store accounts, credit cards, service contracts such as cellphone or DSTV accounts so that you can establish a strong credit history that shows that you are responsible.

Get pre-qualified for a home loan

Before you start house hunting, get pre-qualified for a home loan.

This saves you time as you know exactly what price range you need to be shopping in and what deposit you will need to have available.

But remember that pre-qualification is not a guarantee from the bank that you will get the loan, but a guideline of what you could qualify for.

Two ways to apply

There are two ways in which to apply for a bond or prequalified home loan. You can apply directly to your bank which will evaluate your existing relationship with them to determine your loan rate, or you can use a mortgage originator which will apply on your behalf at multiple banks, providing you with a number of options to evaluate and compare offers and interest rates.

Applying for a home loan

You can apply directly to your existing banking provider, or to ease the stress of applying for a loan with multiple banks, you can make use of mortgage originators such as ooba or BetterBond to assist in firstly getting a loan, and secondly getting the best deal on that loan in terms of interest rates and deposit requirements.

Originators do not charge you for their services as the banks pay them a commission based on the loan amount disbursed.

Budget for all costs

Remember that banks will require a minimum of a 10% deposit on your purchase price, which you will need to pay to the conveyancing attorneys.

If you have an existing bond on a property you need to sell first and check with your bank what the bond cancellation fees are.

Find out from the agent what the transfer duty, bond and registration fees will be.

Ongoing expenses Make sure that you can afford the bond repayments plus the ongoing costs related to home ownership, such as municipal rates and taxes, water and electricity costs, home maintenance, homeowner’s buildings and life insurance cover which the bank will require, as well as content insurance to cover all your moveable assets in your home against theft, damage or loss.

Consider home warranty

No matter how much you love a property, no home is perfect!

Make sure that the home you are buying is free of defects, and if anything unexpected does crop up, that you are protected from the financial implications.