Essential steps to follow when buying your first home in 2021
Category Property24
f there ever was a time to make buying your first home a new year's resolution, 2021 would be the year. With interest rates at historic lows and slowed house price appreciation, there has never been a more appealing time for first-time buyers to enter the market than right now.
See what you'll pay if you get a lower interest rate
According to Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, buyers who enter the market now will be somewhat comparable to those who purchased during the 2008 market crash; the biggest difference being that the market is recovering much quicker than it was back in 2008.
And with the economy still under pressure, the window of opportunity is narrowing. Berry Everitt, CEO of the Chas Everitt International property group, warns that the biggest market obstacle in 2021 will be a predicted increase in SA's already very high unemployment rate in the wake of the Covid-19 pandemic.
"The banks are of course aware of this and already tightening up on their home loan credit criteria in response. So even though we expect demand to remain strong, especially at the lower end of the market, we also foresee that bond approval rates will decline overall, and that demand will translate into fewer actual sales this year," he adds.
READ: Applying for a bond in 2021 is 'going to get tougher'
To achieve a new year's resolution of becoming a homeowner in 2021, Goslett recommends that buyers develop a strict financial plan for the new year.
"Becoming a homeowner depends, in part, on one's ability to create a plan with a realistic timeframe and having the ability to stick to it. Buyers need to analyse their current income as well as their investments and set up additional savings schemes that will ensure the procurement of the funds needed to obtain their goal within the desired timeframe. Meeting with a financial advisor can be helpful in this regard," says Goslett.
READ | First-time buyers guide | Everything you need to know before house hunting
Financial advisors should ask the right questions
A good financial advisor will help you ask the right questions before buying a home. For example, even though you might be most interested in the mortgage you qualify for, a good advisor will prompt you to ask, "How much home should I buy, given all of my short and long-term goals and objectives?"
This is the beginning of a discussion that puts your home purchase in proper perspective alongside every other financial goal competing for your limited resources, according to Nolo.
The discussion should address questions including:
- Will my total housing payments still allow me to save 12% to 15% of my pretax income?
- Will I be able to put at least 10% to 20% down?
- Will my plan work if I opt for a 15-year fixed-rate mortgage?
- What is my contingency plan if my job or family situation changes right after buying and the home's value drops 20% or more?
- Will I have a cash emergency fund equal to three to six months' expenses even after settling into the new home?
- Should I put as much down as possible?
- Am I overpaying for a particular property?
READ | Buying property? Essential questions to ask estate agents
The next step would be to get in touch with a bond originator, to acquire pre-approval for a home loan. A bond originator will determine the amount for which a buyer qualifies. This will prove helpful when setting up a budget for the house hunting process. Buyers should also explore the variety of National Housing Subsidy Programmes available to help afford the costs of homeownership.
The best way to do this is by obtaining prequalification which not only affords buyers the peace of mind that their credit record is in good standing, it also arms them with the knowledge of how much they can afford to spend and the type of home loan deal they can expect from a bank, says Yael Geffen, CEO of Lew Geffen Sotheby's International Realty, adding that buyers should also factor the additional costs into the budget.
Over and above the price of the property, numerous costs arise throughout the buying process, including some which are upfront, out-of-pocket and non-refundable - even if the deal does not go through, while other costs will only hit your pocket once the sale is concluded.
Use the bond calculator to see what your bond repayments will be, including any additional costs
Once buyers are ready to begin the house-hunting process, Goslett recommends that they reach out to a local real estate professional who can guide them in the right direction in terms of where to look for homes that are within their budget. "Real estate professionals also know the available stock on the market and can therefore advise on the likelihood of finding a home that meets the buyer's search criteria before the year is out."
Stick to the plan
"Your dream of owning a home can become a reality provided you take the necessary steps to ensure that you have a concrete plan and the self-discipline to follow through on that plan. I, therefore, encourage all those who dream of becoming a homeowner to take the first steps and start developing an actionable plan set within attainable timeframes to turn their dreams into reality," says Goslett.
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Author: Property24