Purchasing your first home is an exciting time in your life; however it can be a complex process that requires a lot of research. Albertus Van Staden, Head of Credit at FNB Housing Finance explains some of the most common mistakes first time home buyers tend to make.
Affordability will often throw a first time home buyer off because it is not a simple calculation.
“Often first time buyers are overly optimistic about their affordability,” says Van Staden. “Merely taking your income into account is not an accurate assessment of your affordability, as there are expenses that will have to be maintained along with your bond repayments.”
Before starting to look for a home, potential home owners should get an indication of what loan they qualify for.
Financial institutions can often pre-qualify customers. FNB’s own online tool www.fnbpropertyleader.co.za will assess and perform a credit check, giving buyers a pre-authorised amount to enable them to know how much they can buy for.
“Don’t be disappointed if the amount you qualify for is less then you thought, this is to ensure that you can comfortably afford a home loan and avoid getting into financial difficulty later in life,” says Van Staden.
Owning a home means extra expenses
The bond is not the only expense that comes with owning a house.
“Once you have successfully bought your house, you will need to be pragmatic about doing things like furnishing your home. It is not wise to take out credit to furnish your new home. You will need to do this incrementally so that you can keep up with your bond repayments and all the additional costs related to your home,” cautions Van Staden.
Other expenses that will need to be considered and budgeted for include municipality rates, taxes, insurances and levies.
The type of property has an impact
When purchasing your home it is important to note the different types of properties and how they will affect your finances once you are a home owner. For example when you purchase a sectional title you are buying a unit in a complex or a development.
“Sectional titles are considered a more affordable option; because you would pay a fee often referred to as levies that goes towards covering your home insurance and the general maintenance of the common property for the whole complex. However this is different for someone that chooses to purchase a free hold property, which is a free standing or a cluster house, as they would have to maintain their property themselves” explains Van Staden.
In addition, there are rules for the sectional titles and it would be wise to know these before purchasing this property.
“If you want to renovate your home, often sectional titles have restrictions to what homeowners can do to their homes and they have to abide by the rules of the governing body of the complex. This is not always the case for a free hold property, bear in mind that some residential estates also have limitations on what can be done on free hold properties” adds Van Staden.
Buying is not always the answer
According to Van Staden, when someone gets to the stage of buying their first home, practical thinking is sometimes overruled by the excitement.
Patience will mostly work in your favour. Rather ensure that your finances and personal circumstances are completely stable.
“Don’t rule out renting completely because it has various benefits. You can save up for a deposit to ensure that when a good deal comes along, you will have a very good chance to secure the mortgage and the house that you really want, in an area that you have thoroughly researched,” concludes Van Staden.