BUYING A HOUSE IN SOUTH AFRICA: A STEP-BY-STEP GUIDE
Category Property Ownership
The home-buying process may seem daunting at first, but the path is well signposted, and there are expert advisors who can help you along the way.
If you're unsure where to begin, here's a handy step-by-step guide to buying a house in South Africa, so you can approach this important decision with clarity and focus.
Step 1 - Determine what you can afford
Before you start searching for your new home, you should have a very clear idea of what financing is available to you for the transaction. "Rough estimates of what you think you can afford just aren't good enough in these days of stricter lending policies from financial institutions," says Rhys Dyer, CEO of ooba home loans, South Africa's leading home loan comparison service.
A good starting point would be to use a bond affordability tool, such as ooba's Bond Indicator, which is a free, online tool. This will provide you with your credit score, a summary of your affordability, and a realistic indication of your price ceiling. It will issue you with an ooba Bond Indicator Certificate that you can submit when applying for a home loan.
Step 2 - Assess your credit record
Your credit score indicates to your bank whether your past debt repayment behaviour will make you a good risk or not. Through various calculations based on your transactional records, the credit bureau will provide your bank with a three-digit number ranging between 0 and 999. Naturally, the higher the better, and a high credit score rating is one of the most valuable personal finance assets you can have.
In the meantime, ensure you pay your bills on time, and don't borrow more than you can afford; two of the most effective measures for securing a clear credit record.
Step 3 - Find a real estate agent
While it's commonly assumed that estate agents work solely for sellers, they are in fact a great asset to house buyers too. "It's true that anyone can look for a home, and even get a peek inside, without the help of an estate agent but, unless you have the time to make house shopping a full-time job, chances are an agent will be able to match you with your perfect property considerably faster," says Rhys Dyer.
Find an estate agent you can develop a good working relationship with. Their knowledge of the housing market, and their ability to handle the paperwork and deal with sellers on your behalf, will make for a much smoother process. Furthermore, their services to you are free, as their commission is paid by the seller.
Step 4 - Find your ideal home
The part people generally enjoy most about the home-buying process, is the house hunt itself.
The first step is having a clear idea of your requirements before going house-hunting.
Give some thought to:
- Where you want to live.
- Whether it's important to be close to a school, medical facility, supermarket and shops, and other useful amenities.
- The desired size of the home and whether a garden is a necessity.
- Whether you want to live in a gated community.
- Which neighbourhoods do you prefer
Step 5 - Sign an offer to purchase
Once you've found your dream home, and got all your finances in order, you're ready to sign an offer to purchase. This is an agreement between you and the seller that stipulates the terms and conditions for the sale of the property.
Bear in mind that, as Rhys Dyer explains, "far from being simply an agreement, an offer to purchase is a binding contract; once you make an offer, you cannot cancel or easily change it". It's important to have a full understanding of what the agreement entails before signing it. Also bear in mind that the seller is legally obligated to disclose any known defects in the building.
Step 6 - Arrange a home inspection
If you require a professional home inspection, make sure to stipulate this in your offer. This is your opportunity to discover any defects in the property, and it's up to you whether to request that necessary repairs be made.
Step 7 - Apply for a home loan
Once you and the seller have come to an agreement, the next step is acquiring a home loan to fund your purchase, should you not have sufficient capital yourself. A home is a significant investment and financial institutions have systems in place to help people acquire funding within their affordability range.
You can apply to your bank for a home loan directly, but to get the best interest rates rather acquire the assistance of a home loan comparison service like ooba home loans. The bond originator will send your application to multiple banks to secure you the best deal. Like the estate agent, bond originators come at no cost to the buyer.
The less of a risk the bank determines you to be, the more favourable your interest rate will be. Factors that affect this include your credit record, and the size of the deposit you can pay. The higher the deposit amount, the lower the risk for the bank. If your credit is good, you are likely to obtain a 100% home loan.
Step 8 - Close the deal
Once your offer to purchase has been accepted and your home loan is secured the documents are handed to attorneys, who will handle the transfer of the property from the seller to you and the registration of the bond over your property in favour of the lending institution. Be sure to get a quotation from the attorneys as to the cost of bond registration and the transfer of the property in your name. Depending on the amounts of the purchase price and the bond, these costs are substantial, and you must have the funds available upfront.
The attorney will draw up documents for the parties to sign, and send those documents to the Deeds Office, which will examine and approve the documents, normally within 8 to 10 working days.
All in all, the process will take 2 to 3 months, and attorneys and trusted estate agents will be on-hand to guide you every step of the way.
Once it's all done, time to move in and enjoy your new home.
Author: Adapted from www.ooba.co.za
