Zydah Manuel, Portfolio Manager for First Time Home Buyers at Absa, reveals her ‘Top 5’ knowledge indicators, tips and guidelines around how to prepare for owning your first home.
Q: What are the signs that ‘you’ are ready to own your first home?
This is an excellent question because so many people put themselves on a path of thinking homeownership is unaffordable, something only achievable in 5/10 years, or only when the time has come to plan a family. However, depending on individual circumstances, there are often strong indicators that you may be ready right now.
One: Your financial circumstances are such that you can service a long-term debt over 20 or 30 years, and your budget and home loan pre-qualification indicate your level of home loan repayment affordability.
Two: You have enough savings for a deposit on a property and associated costs of homeownership, and you understand the financial liabilities associated with homeownership.
Three: You have a good rental history and are committed to paying credit commitments timeously.
Four: Your risk profile and credit history are such that your credit score from three credit bureaus strongly indicate you are eligible for a home loan.
Five: You are ready to commit to staying in one place for a substantial amount of time, or if investing, you are prepared for the security and stability of a fixed asset, and you want to expand wealth creation through property investment.
Q: What should be given priority in prepping to own a home?
One: Understanding how to budget to ensure property ownership is affordable and sustainable.
Two: Reducing unnecessary expenses now to cater for a new home's expenses. These include levies, insurance, rates and taxes, electricity, water, and extra savings for maintenance or unexpected homeownership challenges.
Three: Savings enough for a deposit and all associated costs in the buying process. For example, attorney fees, registration and moving costs.
Four: A strong credit score, which requires consistent and timeous repayments of credit loans and closing any past negative credit issues. Five: Understanding of 'offer to purchase' agreements as these clearly define the rights and obligations of each party in such legally binding contracts.
Q: What are the pitfalls to homeownership, and how do you overcome those?
Buying a home is a life-changing decision, and as such, anxiety levels can rise during the buying process. A potential buyer will question every step of the journey, whether it's the right property, time, decision, etc. But, most importantly, it's a common theme throughout the lifespan of property ownership: affordability in the long term!
One: Affordability - not checking and understanding affordability and the impact of a credit record before entering the buying process.
Two: Pre-qualification - not having completed a pre-qualification process with a reputable financial institution to measure and ensure on-going affordability of a home.
Three: Research area - not finding out enough about the neighbourhood and whether its services support your lifestyle needs.
Four: Attorney costs - not having saved enough to pay for bond registration, transfer costs and other affiliated home acquisition expenses.
Five: Other expenses - not making provision for hikes in interest rates, municipal rates and taxes, maintenance and insurance.
Q: What are your top 5 tips when researching for a first home?
One: Location - is it suitable for your lifestyle?
Two: Suburb - examine suburb property reports. Explore the property valuations in the area and estimated rates and taxes, security, amenities and urban planning schedules.
Three: Property type - Clearly understand the benefits and/or needs of the type of property you are interested in. This includes whether you want freeholder ownership, estate living or sectional title, for example. The latter two are popular because of their cost-effectiveness, heightened security and community living. They also remove the responsibility of paying individually for building insurance, for example, upkeep of communal areas, which, compared to freehold, can become burdensome on the owner.
Four: Buying process - research and understand the buying and lending processes before entering the marketplace. Ask your bank or financier for a step-by-step process guide.
Five: Budget - be clear on your budget restrictions and ensure all potential home ownership related costs are accounted for.
Q: What value statements are engaged when owning a property?
One: Building equity - your equity is the difference between what the property can be sold for and what you still owe. Equity grows as you pay down your mortgage. So over time, more of what you pay monthly goes to the balance on the loan rather than the interest, which builds more equity.
Two: Diversifying wealth creation through property purchases - owning a home offers the long-term benefits of security and potential growth in personal wealth.
Three: Stability - people tend to stay longer in a home they buy only because buying, selling and moving is complex. Choose confidently and carefully so that your property decision can serve you for years to come.
Four: Building credit - owning a home can strongly contribute to an individual’s credit worthiness.
Five: Personalisation, a sense of security and belonging - a homeowner has creative control over the property owned. You can alter the property, including decor changes, landscaping and renovations to suit your needs and lifestyle.
Q: What tools does Absa provide to help its client’s confidently approach homeownership?
While most banks assist with the credit-lending process, Absa also includes educational and enabling pre-buying tools and various home loan propositions. All can be accessed through the Absa website - www.absa.co.za. Here are my top five tools:
One: The Absa Home Loan Pre-qualification tool is a quick and straightforward way of discovering what Absa may lend customers before they start searching for a home.
Two: The Absa MyHomeOwnerJourney is a free e-learning platform that can help first time home buyers understand the ins and outs of homeownership and answer all the pressing questions before making such a big decision.
Three: The Absa Knowledge Hub Centre. A visit to this knowledge hub centre reveals many articles that answer the most frequently asked questions about buying a property.
Four: Absa Bond calculator. This calculator factors in the registration charges, transfer costs and attorney fees involved in taking out a new home loan and calculates the actual costs.
Five: The Absa Home Loans Digital Sales Platform (Home Loans DSP) enables you to apply for your home loan online with simplicity and speed, whether it’s a single or joint application. DSP is accessible from the absa.co.za website and gets the process going in record time, on any device, at any time. Customers can apply via absa.co.za/homeloan online where they can complete their application in under 15 minutes.
The guidelines provided above should be sufficient to evaluate your readiness to have a home.
