South Africa has the smallest margin when it comes to monthly rental versus mortgage payments and despite slightly higher interest rates and consumer price hikes, the outlook for the property market in 2022 remains healthy. And it still favours buyers expected to become homeowners for the first time.
The demand for property, particularly in the more affordable market segments, presents some attractive options for first-time buyers looking to realise their dream of becoming homeowners.
Starting the house-hunting process is of course incredibly exciting, leaving the most level-headed among us prone to a misstep or two. The trouble is even the smallest errors can be costly for novice buyers which is why is pays to know how to steer clear of them from the get-go.
And even experienced buyers may require some help in determining where they currently stand financially, and what they’re in for when buying property.
It’s essential to know exactly what you are able to afford, and what your credit rating is. Banks will only approve you for an amount you are able to repay, and credit ratings under 600 will not be accepted.
1. Understand preapproval vs. Qualified Buyers Certificate
One thing that will help you stand out to sellers, Property Practitioners, and banks is a Qualified Buyers Certificate. This involves a more in-depth process than a preapproval and is executed by financial experts. Potential home buyers with a Qualified Buyers Certificate increase their chances of being approved by over 90%.
A Preapproval is the simplest way to determine what you can afford and what your credit score is. A preapproval increases your chances of having offers accepted by sellers and allows you to make adjustments to your finances as needed. While a pre-approval is useful in providing a clearer idea of where you’re at financially, it doesn’t guarantee that you’ll be approved by the banks.
Simply put, a Qualified Buyers Certificate is a more robust version of a prequalification. It is conducted by a home finance expert who evaluates your affordability in much of the same way that the banks do. Documents are assessed, in-depth credit checks are performed, and your financial position is determined before you receive the certificate.
What makes a Qualified Buyers Certificate such a powerful secret weapon is that it mimics the steps a bank will take when analysing your finances once you’ve applied for a home loan. It is often conducted as a precursor to a home loan application and saves on approval times. Therefore, if you complete a prequalification and then apply for a Qualified Buyers Certificate, your application is already 25% complete
2. Not finding the right property practitioner for you
Chat to a few property practitioners in your neighbourhood/s of choice to get an expert view of the area. Get a good idea of a suburb’s potential, the pros, and cons before you start house hunting. You don’t want to move into your dream part of town only to discover persistent water issues. Partner with a reputable property practitioner (or two) who understands your needs as a prospective buyer. A knowledgeable agent with a good track record can make all the difference to your homebuying experience.
3. Ignoring those Ts and Cs
Buying a home is one of the biggest financial decisions you’re likely to make so it’s the one time you want to get familiar with all those terms and conditions. What are your rights and responsibilities as a buyer? What happens if the seller reneges on a clause in your initial offer to purchase? Does the home you intend to buy come with a valid set of building plans? What are the conditions of your offer to purchase?