He notes that it is especially important for consumers who intend to become homeowners during 2015 to have a plan of action that they can focus on to bring them closer to achieving their dream of owning their own property. According to Goslett, there are six key essentials that potential homeowners should bear in mind when putting their homeownership plan together.
There is no secret formula when it comes to getting ready to purchase a property, but one of the vital aspects to home-buying readiness is having enough money saved up to cover the deposit requirements and other costs associated with buying a property. Although it is possible to achieve a 100% home loan, most financial institutions will require the buyer to place a deposit of between 10% and 30% of the purchase price of the property to secure approval. What this essentially means is that a buyer will require a minimum deposit of around R100,000 on a property that costs R1 million, bearing in mind that does not include other expenses such as transfer costs and attorney fees. The other advantage to having a deposit, besides vastly improving the applicant's chances of approval, is that fact that it can positively influence the interest rate provided by the bank.
"It may not be easy, but potential buyers will need to curb their spending and cut back on any non-essential expenditure so that they can put as much money aside as possible. Even a few hundred rand a month can make a difference and bring them a step closer to the goal of owning a property, provided they are consistent and stick to the plan," advises Goslett.
Affordability is a key factor that banks consider when looking to grant finance to a potential buyer. This is largely measured by a consumer's debt-to-income ratio and the percentage of expendable cash they have at their disposal. Generally South African consumers have high debt levels which put pressure on their affordability ratios. "For those who are eager to get their foot into the property market door, paying down debt where possible is essential, along with avoiding purchasing any large items such as a car for example," advises Goslett. "It is better to stay away from any new credit in order to ensure that debt-to-income ratios remain within a favourable range. Regardless of whether a new item is purchased or not, an enquiry by a potential lender could negatively affect a consumer's score, so it is best not to apply at all."
The majority of first-time buyer will be reliant on a financial institution for a bond to purchase a property. Therefore it is vital for consumers looking to obtain finance to keep their credit record well maintained and favourable. Although the credit amnesty bill removed defaults from certain consumer's credit records, this does not mean that a consumer's credit score is any less important to maintain. A buyer's credit score will have to be a minimum of 750 in order for them to be successful in their application for finance. A potential buyer's credit score will also be taken into account when determining the interest rate that the bank is willing to provide to the buyer.
"Consumers are entitled to a free annual credit report from most credit bureaus, so they will be able to check their score before they apply with the bank. The New Year is an excellent opportunity to go over your credit score and see where it can be improved," says Goslett.
The bank, or a bond origination company such as Betterbond, will be able to assess a potential buyer's finances and give them an idea of what they qualify for before they apply for a bond. This will provide the buyer with some much needed guidance as to what they can afford and commit to over the term of the home loan. "It is important that buyers consider affordability in terms of what they can sustain over the term of the loan, which includes expenses such as utility costs and maintaining the property. Resources are available to buyers to help them determine what the figure is and precisely assess their financial situation. These resources include financial advisers, banks and bond origination companies to name a few. Ideally, bond repayments should not exceed 30% of the buyer's total monthly expenses," Goslett explains.
The home buying experience will be largely determined by the estate agent that the buyer chooses to work with, so make sure the selected agent is right for you. When looking for an agent it is important that buyers keep a few things in mind during the selection process, such as the brand the agent is from. "A reputable real estate brand will enjoy a large network of professionals at hand to assist where possible," says Goslett. "Another thing to keep in mind is that agents work in specific areas, so select an agent that has solid working knowledge of the area in which you are interested in purchasing. The buyer must feel comfortable with the agent and they need to be able to communicate effectively with each other so that no time is wasted by the agent showing the buyer properties that don't meet their criteria. The buyer is well within their right to request that the agent provides them with recent testimonials and references from happy clients."
Look at your lifestyle and future plans to determine what criterion is required for the perfect home. Where possible, potential buyers should be researching and finding out as much information about the market and the properties available to them. "Knowledge about the property market will provide buyers with insight into the areas they want to live in and the type of property that will best suit their needs. This will greatly narrow the search and provide them with useful information to make an informed decision. Knowledge is the key to success when it comes to determining a good property investment from a bad one," Goslett concludes.
