First Time Buyers Guide

“Buy when everyone else is selling,” may have become a little clichéd, but it speaks a fundamental truth. When the supply is up and the demand is down, you are more likely to find good value in whatever asset it is that you want to buy. With the South African property market not too far away from the bottom of its current downward cycle, now is a good time to bite the bullet and to stake your claim on a pad of your own.

If you have decided to cross this Rubicon, and feel a little unsure how to best proceed, you should find this first time buyers guide very helpful indeed. In essence, acquiring a home should be undertaken in three phases: The Planning and Investigation Phase; The House Hunting Phase; and finally, the Paper Work Phase.

Phase 1: Planning and Investigation

Obtain your Credit Report
You are entitled to a free credit report from both Experian and Transunion ITC once a year. Your credit report will play a very important role in your ability to secure a mortgage and influence the interest rate your mortgage will be subject to should you be approved. Request yours early on during the process.

When you review your reports, check for discrepancies. If there are any, you will be required to submit a written request, together with supporting documentation, to the relevant credit bureau, stipulating that a discrepancy exists and that the discrepancy should be removed from your report.

Identify a Mortgage Originator
The role of the mortgage originator is more than just guiding you through the mortgage application process. They will liaise with the various lenders, secure quotes and negotiate the best possible interest rates on your behalf. Their services cost nothing. The successful lender gets to pay their fee.

The reason why you need to appoint a mortgage originator during the planning and investigation phase already, is that your mortgage originator will also be able to explain to you exactly how a mortgage application is evaluated, the type of documentation the banks will require and how your particular circumstances stack up against the minimum requirements of the lenders in terms of extending finance. They can offer you guidance around the size of the mortgage you would potentially qualify for, how big a deposit you may need, and what the various taxes, duties and fees associated with purchasing a home within that price range, would tally up to.

You need to be very honest and open with the mortgage originator. If you are not likely to qualify for any form of home loan, it is better to know this sooner rather than later. The originator will be able to advise you on the actions you could possibly take to remedy the situation.

Know what you want
Decide upfront what your ideal start-up home should look like. The reason for this is that hunting for a home becomes considerably easier if you know what to look for. Make a list of what you consider to be essential (i.e. two bedrooms), preferred (i.e. room for pets), optional (i.e. electric gate) and undesirable (i.e. next to a railway station).

Now is also a good time to decide which area and, if you want to be more precise, which neighbourhood within that area you would like to live in.

Know the Neighbourhood
Getting to know the neighbourhood involves finding answers to questions like:
• What is the price of a home similar to the one I am seeking? How many homes such as these have entered the market in the last six months? How many homes such as these have been sold in the past three months? How long did it take for these homes to be sold?
• What are the crime statistics? Is there a neighbourhood watch?
• What are the rates and taxes levied on properties in the neighbourhood?

If you don’t like what you have found out, it may be a good idea to opt for a different location.

Double Check your Budget
Owning a home is different from renting a home where budgeting is concerned. You will have to consider – in addition to your mortgage repayment – expenses normally not incurred when you rent. This would include rates & taxes, maintenance, security services, assurance and insurance.

Identify an Estate Agent
It is important to select a reputable estate agent who is dedicated to your chosen neighbourhood, early on. The agent’s role will be multi-faceted: They are a valuable source of neighbourhood specific information, effective in identifying properties that would suit your requirements and in a position to help you through the mass of legal paperwork associated with the purchase of a property.

Once you have gone through these steps, you will be ready to proceed to the second phase.

Phase 2: House Hunting
If you had the wisdom to solicit the help of a professional estate agent, you should only end up on the doorsteps of homes that meet your specifications and fall within the ambit of what you can afford. This is the easy part of house hunting.
The tough part is remembering the details of the homes you viewed and being objective enough to spot problems that may be lurking behind the veneer of fine furnishings and behind the inspiring fragrance of a Yesterday-Today-and-Tomorrow shrub in the garden.

To overcome these two obstacles, you may want to take notes and you may want to jot down the critical things you need to pay attention to while walking through the house. These include:
• Structure: Are there cracks, rising damp and plumbing that wails when you turn on a tap?
• Garden: Are there cracks in the boundary walls? What type of soil is in the garden? Are there trees that may cause structural damage over time?

After visiting a house, ask the agent what type of foundation was used, what the latent defects are of the house (such as a leaking roof or other structural/ electrical or plumbing problems), and whether the house has a misery history. The latter is important because misery homes are generally tough to sell, and a tough-to-sell property is exactly what you do not need when buying your first home.

When you view houses, some will elicit an outright “No” response from you while others will leave you thinking “Maybe”. You can ask for as many return visits as you like to these maybe-homes if you are trying to reach some sort of a decision. It is better to call two times too many, than two times too few.

If the home is a sectional title unit, request the Body Corporate’s financial statements from your estate agent. Then ask your mortgage originator to have it checked over. The reason for this is that unhealthy finances on the part of a complex could see your mortgage application being declined.

Once you have found the right home at the right price, the only bridge remaining to be crossed is the paperwork phase.

Phase 3: The Paperwork Phase
This is the stressful part, unless of course, you have chosen your agent and your mortgage originator well. The paperwork phase comprises of the purchase process and the mortgage process.

The Purchase Process
Fortunately, this process is less cumbersome for a buyer than for a seller.

You will be required to sign an Offer to Purchase on the property you wish to buy. The estate agent will deal with the negotiations and, if your offer is accepted and your financing approved, get the ball rolling in terms of the legal process. They will continue supporting you throughout - until the final transfer is done.

The Mortgage Process
Here the joy of availing yourself of the services of a mortgage originator comes into play and where having formed a relationship early on, really starts paying off!

Your mortgage originator, will normally only put you through the application process once, regardless of whether they approach two or six lenders on your behalf. They will help you to evaluate the quotes from the various lenders and negotiate with these lenders in an attempt to secure better interest rates.

Once you are approved, they will continue supporting you at least until the final paperwork is signed.

Disclaimer
In compiling this article due caution was exercised in an attempt to gather information from reliable and accurate sources. The article is of a general nature and does not purport to offer financial or investment advice. Neither the author, nor the publisher, will accept any responsibility for losses, omissions, errors, fortunes or misfortunes that may be suffered by any person that acts or refrains from acting as a result of this article.

By: Justin21 Harrison21

Article Source: http://www.directorys.uniquearticles.info

Justin Harrison is author of this article on Home Loans. Find more information about Bond here.

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