Finding a home you love is exciting. Once you’ve seen the right one, it’s easy to start picturing the couch in the lounge and the herbs on the kitchen windowsill. But if your finances aren’t ready, that excitement can quickly turn into disappointment, or into a commitment that stretches you too far.
First-time buyers who sort out their money before they house hunt tend to have a smoother experience. They know what they can afford, they can move quickly when the right property comes along, and sellers and agents take them more seriously.
Here are three smart first steps, and the costs many first-time buyers forget about.
Step 1: Check your credit profile
Your credit profile is one of the first things a bank looks at when you apply for a home loan. It shows how you’ve handled credit in the past, including store accounts, credit cards, vehicle finance and personal loans.
Before applying:
- Get a copy of your credit report. In South Africa you’re entitled to a free credit report each year from the major credit bureaus.
- Check it for errors. Accounts you don’t recognise or incorrect payment histories can be disputed with the bureau.
- Tidy up where you can. Paying accounts on time, bringing arrears up to date and reducing outstanding balances can all help, though improvements take time to show.
Step 2: Work out what monthly repayment you can comfortably afford
What a bank will approve and what you can comfortably live with are two different numbers. Start with your own budget:
- List your take-home income and all your current monthly expenses.
- See what’s realistically left over for a bond repayment.
- Leave room for the other costs of owning a home (see below) and for savings.
Remember that most South African home loans have variable interest rates. If rates rise, your repayment can rise too. Build in a buffer so a rate increase doesn’t put your household budget under pressure.
Step 3: Get bond pre-approval
Pre-approval (sometimes called pre-qualification) gives you an indication from a lender, or through a bond originator, of how much you’re likely to be able to borrow. It isn’t a final loan approval, but it’s a valuable step because it:
- Gives you a realistic price range to search within.
- Saves you from falling for homes outside your budget.
- Shows sellers and agents you’re a serious buyer.
You’ll usually need recent payslips, bank statements and ID documents, so gathering these early also speeds up your final application.
Budget for more than the deposit and the bond
This is where many first-time buyers are caught off guard. On top of your deposit (if you’re paying one) and your monthly repayment, plan for:
- Transfer costs. These include the conveyancer’s fees and, depending on the price and type of sale, transfer duty.
- Bond registration fees. These are charged for registering your home loan at the Deeds Office.
- Moving expenses. Removal companies, vehicle hire, time off work and the small things that add up on moving day.
- Ongoing maintenance. Every home needs upkeep, from minor repairs to bigger items over time.
Ask your conveyancer, bank or bond originator for an estimate of these upfront costs based on the price you’re considering. Then make sure you have the cash set aside.
