Home buying? Here’s What to Expect
Home buying is an exciting and significant decision. However, obtaining a home loan also remains one of the biggest financial decisions of your life.
Where to start
When home buying, 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 affect 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 when home buying.
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 buying.
One of the biggest mistakes you can make is to forget about the cash funds needed in home buying. 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 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. Your estate agent will assist you with this information and advise you to ensure you make the right choice. This will give you a good estimate of what you should expect to pay.
The general condition of the house is also an important pricing factor in home buying.
Take into consideration maintenance in or around the building.
What should you do once you have made up your mind sign an offer to purchase with the seller?
At this stage, be sure to add an inspection contingency and time frame to the contract. Only then make an offer!
Remember, almost all previously owned homes are sold with the “Voetstoots” clause in the Offer to Purchase!
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 approval in principle (AIP). This usually takes five to seven working days.
The bank will then arrange an appointment with the seller 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
Once the seller has signed the sale agreement you need to obtain a home loan. On approval of the home loan, the conveyancer (transferring attorney) to start the administration process. The transfer is processed as follows:
- The seller has the choice of appointing a conveyancer, who will obtain FICA (ID and proof of residence) of both parties.
- The conveyancer then applies for the seller’s bond cancellation figures. Thereafter, the bank sends the original Title Deed to the bond cancellation attorneys.
- After their preparation by the conveyancer, you and seller sign the transfer documents.
- The conveyancer then requests a rates clearance certificate from the local authorities and municipality to ensure that all the seller’s rates and taxes are paid up to date.
- The bond attorney contacts the conveyancer and advises the amount available for guarantees.
- They then request the draft transfer deed and guarantee requirements. The bond attorney is requested to cancel the seller’s home loan on receipt of a guarantee for the outstanding amount.
- If the property price is above R1,000,000 you then pay the South African Revenue Services (SARS) transfer duty, a tax levied on property transfers. The conveyancer will request a transfer duty receipt on SARS e-filing and also make the payment of the transfer duty on your behalf.
- The conveyancer then lodges all the required documents, together with the new bond and the old bond cancellation, with the Deeds Office.
- After 8 to 10 working days for these to be examined and, provided there are no changes, the transaction is registered. You are then the rightful owner of the property!
Inspected Once, Inspected Right!®