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.
It is therefore “vital” to be aware of the major potholes you need to avoid, especially if you are a first-time buyer, says Gerhard Kotzé, managing director of the RealNet estate agency group.
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1. Not thinking location is a big deal
Many buyers mistakenly believe that area is not that important, as long as it is convenient for them. This is because they think they will more than likely move to a different home in a couple years’ time.
“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 a buyer has a choice between two areas that are close to work, for example, he says they should 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.”
2. Rushing into a purchase
Buyers should always avoid buying in a rush, especially in a town or area they do not know well. Kotzé says thorough research is essential, so even if one does not have young children, for example, they 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 their 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.”
3. Opting to not get pre-qualified for a home loan
The third pothole to avoid, he says, is not taking the time to pre-qualify for a home loan before starting to look 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.”
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4. Putting all your money into the purchase
Finally, Kotzé says, buyers must avoid putting all their cash or savings into their home purchase.
“While lenders are obviously more likely to approve a loan with a 10% or 20% 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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