Buying a home? Here’s What to Expect
Buying a home? This is an exciting and significant decision. However, it also remains one of the biggest financial decisions of your life.
Where to start
You must do your homework first. Numerous estate agencies have open houses in various areas every weekend, and some even during the week. You will get a feel for the sizes that suit your needs. You also get insight into your choice of area. Think about accessibility to work, public transport, schooling and other amenities.
Keep in mind that location is of great importance, especially to secure your investment for the future. It may also have an effect on your loan approval.
Viewing a few homes in different areas will help you to know exactly what type of property you can afford. It’s not only the home loan instalment you will be paying. You need to factor into your budget costs such as bond and transfer fees, insurance and municipal costs.
What costs to factor in
Make sure that you are aware of the process and all associated costs when buying a home. Ask your estate agent for help if you are uncertain. Get a bank pre-approval, so that you know which bond amount you would qualify for. This will also assist in your home search.
One of the biggest mistakes you can make is to forget about the cash funds needed in buying a home. On approval of the loan, you will start receiving invoices from the attorneys. This is when you realise that you will need additional funds. This could put a damper on the excitement of owning your own property.
A reputable estate agent will provide you with the information you need to prevent any unforeseen costs.
If you qualify, some of the home loan products will allow you a larger loan without paying a deposit. Others require the security of investing by having an upfront amount.
Also, be aware of other once-off costs that you will have to pay, over and above the deposit. These include initiation and administration fees, legal costs, bond registration fees, VAT or transfer duty. And a home inspection!
Making the offer
Consider sale prices of similar houses in the neighbourhood for the past year, as well as the current market situation. Only then make an offer. This will give you a good estimate of what you can expect to pay.
Your estate agent will assist you with this information and advise you to ensure you make the right choice. The general condition of the house is also an important pricing factor.
Take into consideration maintenance in or around the building when making an offer.
Once you have made up your mind sign an offer to purchase with the seller. However, be sure to add the following clause to the contract: “The sale is dependent on a satisfactory home inspection“. The importance of a home inspection is paramount. How else will you determine the actual condition of the home?
Applying for a home loan
When applying for a home loan, you will need the following documents:
- A signed offer to purchase.
- Proof of income.
- A South African bar-coded or Smart Card identification document.
- Proof of current residential address, such as a municipal account, Telkom account or valid TV license.
- Salary earners need to include a recent salary slip.
- Bank statements for the last six months.
Once you have all your documentation, the approval process begins, and you will receive an approval in principle (AIP). This usually takes five to seven working days.
The bank will then arrange an appointment with the seller in order to do a full valuation of the property. This ensures that your investment is sound and that your home choice is at market value.
The transfer process
On approval of the home loan, the bank instructs the bond attorney and transferring attorneys to start the administration process. The transfer is processed as follows:
- Title deeds and cancellation figures are requested from the bank currently holding the home loan.
- A rates clearance certificate is requested from the local authorities and municipality.
- The bond attorney contacts the transferring attorney and advises the amount available for guarantees.
- They then request the draft transfer deed and guarantee requirements. The cancellation attorney is requested to cancel the seller’s home loan on receipt of a guarantee for the outstanding amount.
- Once the transfer attorney has received the title deed and cancellation figures, you and the seller sign the transfer documents.
- The buyer pays the transfers costs to the transferring attorney.
- The bond attorney prepares the home loan documents which the buyer signs together with paying the fees.
- The bond attorney lodges the documents at the Deeds Office.
- The Deeds Office receives the documentation and checks it before being registered.