Buyers guide: Step 1 Getting your bucks in a row

Here’s what you will need to do to get yourself ready to take on the financial commitment of a mortgage.

MAKE SURE YOUR CREDIT HISTORY 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:

• If you don’t have one, you should apply for a credit card, as this aids your score.
• Check your status by getting a free credit report from one of the credit bureaus.
• Pay all your bills on time, every time.
• Clear as much of your debt before applying for a home loan.
  
  

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, the amount owed is decreased so you save on interest paid over the loan term.
• A deposit means your bond repayments will be lower. As a general rule, your monthly bond repayment should not exceed 30% of your gross monthly income.
• You’re in a better position to negotiate an interest rate since there is a 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.

BONUS TIP : As a general rule, your monthly bond repayment should not exceed 30% of your gross monthly income.

Check how much you can afford with our Affordability Calculator.

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:

• bondinitiation 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.

BONUS TIP : Go here for a full breakdown of the costs involved.

HOME LOAN PRE-QUALIFICATION

Visit your bank branch and find out about getting pre-qualified for a home loan. It takes away some of the uncertainty in your home search, since it gives you a good idea of what you can afford. It is not a guarantee that your bond will be approved, as there are many factors regarding the property that the bank takes into account as well, but at least you can start your property search in the right price range. Sellers and agents will also see you as a serious buyer, who can afford the property.

How home loan pre-qualification works:

Getting pre-qualified 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 pre-qualification certificate which shows the home loan amount you have been pre-approved for.

Now that you have your bucks in a row...

The next step in your First-Time Home Buying Guide is "House hunting":

1. Getting your bucks in a row
2. House hunting - Homing in on your new house
3. Doing the deal
4. Home loan know how
5. The legal aspects
6. Moving tips