Buying a home is still one of the biggest financial commitments that most people will ever make – and it has become even more complex in recent years so it’s vital to be aware of the major “potholes” you need to avoid, especially if you are a first-time buyer.
The first of these, says Gerhard Kotzé, MD of the RealNet estate agency group, is the mistaken belief that area is not that important, as long as it’s convenient for you, because you will most likely be moving on to a different home in just a couple of years.
“The location of a home remains critical, because whenever you do decide to move, the price that you can get for your current home will significantly affect the price that you can afford for a new one. So to give yourself the best start on the property ladder, when you buy your first home you should aim for the most desirable area and best position in that area that you can afford.
“If you have a choice between two areas that are close to work, for example, pick the one where there is most demand and which has shown the best price growth in recent years – even if it means that you have to buy a slightly smaller or older home to be able to afford to live there.”
Secondly, he says, you should always avoid buying in a rush, especially in any area or town that you don’t know well. Thorough research is essential, so even if you don’t have young children, for example, you should still check the quality of the local schools, as well as the medical facilities, the crime rate, shopping areas and entertainment facilities – anything that could affect the resale potential of your home.
“And an experienced and well-connected local agent will be an invaluable resource to you in avoiding both these potential pitfalls, especially if you are very specific about what sort of property you are looking for. We recommend that you work with a professional agent from a national group like RealNet, who has the training, know-how and access to the technology necessary to provide you with the latest market information about areas you are interested in, and help you find exactly the right home.”
The third pothole to avoid, says Kotzé, is not taking the time to pre-qualify for a home loan before you start looking at properties for sale. “You really need to go through this process with a reputable mortgage originator so you are very clear about what you can afford, and don’t waste any time looking at homes that are out of your price range.
“In addition, being pre-qualified for a loan will give the home seller confidence that you will be able to finance your purchase, and this will improve the chances of your offer to purchase being accepted, especially in a multiple offer situation where other buyers are not sure about being able to get a home loan.”
Then finally, he says, you should try to avoid putting all your cash or savings into your home purchase. “While lenders are obviously more likely to approve a loan with a 10 or 20 percent deposit, it is prudent for buyers to keep some cash in reserve for unexpected moving expenses and emergencies, as well as the legal, bond and transfer costs which in most cases have to be paid in cash.
"Rather try to obtain the maximum home loan you are comfortably able to afford, leaving some leeway for possible future interest rate increases. And if you do have any spare cash left after the move, you can always pay it straight into your home loan account to immediately reduce the principal amount and increase your home equity.”
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