select
|

Financial blunders to avoid when buying a home

While setting enough money aside for a deposit for a home is in itself a financial feat of epic proportion, it is not the only financial consideration that would-be homeowners need to make when preparing to dip their feet in the market.

According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, having savings set aside is a vital element for homeownership preparation. However, there are also several financial blunders that potential buyers can make, which will complicate their prospects of being able to purchase a property. “If you want to give yourself the best possible chance of success when applying for a bond, you need to avoid certain financial missteps during your home buying journey,” Goslett adds.

He provides buyers with a few things to avoid:

Avoid letting your credit score drop

According to Goslett, there are two main reasons that a favourable credit score will help. The first is that is will improve your chances of bond approval, and the second is that it will impact on the interest rate the bank is willing to give on the loan. Any late payments on credit accounts will hurt your credit score, so it is important that all payments are made on time.

Stay away from additional debt


“During the home buying process, it is also best to avoid applying for additional credit such as store accounts or credit cards, as multiple credit enquiries will have a negative impact on your credit score. You should ideally focus on paying down any existing debt to around 30% or less of the limit and correct any errors on your credit report,” says Goslett.

Consumer debt accounts for a large percentage of a buyer’s credit score. While a late payment on any consumer debt will have a massive effect on a credit score, the type and the time since the last late payment also matter. “You should pay off any accounts that are due, before applying for a home loan,” advises Goslett.

Avoid the urge to splurge

During the home buying process, don’t go on any credit-driven retail splurges or buy any big-ticket items such as a car. Purchasing large items on credit before applying for a bond will reduce your chances of approval, as well as the amount that the bank is willing to give them.

Even if you purchase a big-ticket item with cash, it can raise flags with the lender.  Large withdrawals from your account might require an explanation during the bond approval process.

Don’t change jobs

Lenders prefer applicants who have a steady, stable income and they take the length of employment into account. “Financial institutions like it if you have a stable employment record with at least six to twelve months or more in the same job with a regular income,” says Goslett. “If you are considering a change in career and buying a new home, you should put one decision on the backburner for the time being. Either hold out of changing jobs or buying the property.”

Don’t buy to the max of your limit

While tempting to look for a property at the full limit of what the bank is willing to give, if it is not what you can comfortably afford, it is not a good idea. The home loan repayment is not the only monthly expense that needs to be taken into account. Try to stay within a price bracket where you can comfortably manage the monthly bond payment and have something left over. By looking at homes below your maximum limit, you will also be able to compete with other buyers in a multiple-offer situation.

“Avoiding these mishaps will help you to prepare for home ownership financially.  Being equipped and prepared is the first step to achieving your goals,” Goslett concludes.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK