How to apply for a home loan – On the Money with Jarryd Neves

Jarryd Neves
On the Money. Budding stock market investor Jarryd Neves, of BizNews, sends out an invitation to everyone who wants to ask questions about share investing – but is too embarrassed to ask. Write to [email protected] And tune in for his regular Monday column: On the Money

Purchasing your first property is a very exciting time. And why not? Most likely, you’ve sacrificed and saved for years. Staying in when everybody was going out on the town, eating baked beans for dinner or simply pinching pennies. Whatever road you took, it’s a sacrifice and you’re now in the position to purchase your very own property.

Of course, unless you’re very good at saving, patient or both, chances are you’ve managed to save up enough for a deposit, not the entire house/property. So this is where it starts to get tricky, especially if you’re a first time buyer. Where do you start on the journey to applying and obtaining a home loan?

Let’s start off with a few simple steps that will help you get your ducks in a row. Use your earnings, monthly expenses and deposit as a gauge, in order to determine what is in your price range. Remember to factor in future potential expenses, such as home insurance, security and things like maintenance and rates.

Take your time searching the for the ideal property. There’s no rush. One of the biggest mistakes first-time buyers make is rushing into the first property they see, unaware of potential hidden defects or better bargains that are available. Once you’ve found the property of your liking, put in an offer and apply for your home loan.

It’s worth remembering – even for those that aren’t ready to purchase a property yet – that things like your credit score and record (your history on paying debt back) – impacts these decisions. Aside from that, the biggest other factor is, of course, your deposit. According to ooba.co.za, a credit score of 600+ should give you a good chance of home loan approval.

Remember that while your home loan may be approved, it is equally important to draw up a purchase agreement between you and the seller. If you’re both happy, sign it in order to secure the deal. Of course, if you’re having second thoughts – or simply just feel more comfortable having someone look over it – have your legal counsel or an estate agent look over the contract/paperwork for you. This can save you years of heartbreak and financial mess.

Applying for the home loan is the deciding factor. Again, the experts over at ooba.co.za note that having a larger deposit increases your chances of having your loan approved. Normally, most lenders require a minimum deposit of 10% – but obviously, the more you can give, the better. It’s also worth noting that many banks and home loan companies have been approving 0% home loans. This is, of course, subject to an excellent credit rating and debt track record.

Once the loan is approved, you’re over the hill – but there’s still a long journey ahead. The property still needs to be transferred into your name, which will be done when a conveyancer – on behalf of the seller – goes through the (often lengthy) property transfer process.

Remember, you need to budget for unforeseen costs. For example, the conveyancer will charge you for the property transfer and there are fees to be paid for the registration of the bond. It’s not a flat rate, and the transfer duty can vary, depending on the value of the property.

While the various legal processes can be daunting, don’t allow it to ruin the experience – or indeed, put you off. If you’re intimidated by the process, make sure that you have trustworthy people around you, to guide you through what can be a stressful time. However, if all goes well, you’ll have achieved what many dream of – property ownership.

Have a question about share investing? Write to me at [email protected].

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