Some Homebuyer Steps

Home Buying Guide

The home buying process can be described in many ways by different financial services providers based on their products and services offerings.

Setting out basic steps together with some links to professionals that assist in different aspects of the process.

First Step

Determining what you can afford is critical. Complete a personal budget, or a combined budget for that matter, and determine your own affordability prior to making use of any calculator out there. Why you may ask? Because your first calculation without the influence of a company calculation would form the backbone of your financial decision. Keep in mind, that calculators out there are formulated to generate maximum amounts, and this could guide you in the wrong direction from the onset.

Second Step

Based on your own calculation, whilst considering results obtained from calculators widely available on the web, decide how much you are willing to borrow. Understanding the implications any debt would have on your budget is important. Having repayments influence your surplus capital shouldn’t be a surprise, but rather an expected outcome of research well done.

Third Step

So you’ve done the hard part, you’ve reviewed your budget and considered the daunting impact of taking on new credit. Now starts the fun part of the journey, finding the dream home or fantastic investment opportunity you’ve been dreaming of. Take a moment to savor this part of the process, it’s probably going to be one of the stories you’re likely to tell people for years to come.

A quick tip:

Get professionals involved to find what you are looking for. Finding an estate agent in the region you would preferably like to purchase your property just makes sense.

Fourth Step

Making an offer could be daunting, we know, but it doesn’t have to be. In most instances, the seller would provide an Offer To Purchase (OTP) on a basic template, and that’s okay. Make sure to read through the document and familiarise yourself with the general terms and conditions of the offer, you don’t want any surprises along the way. To quickly highlight important bits of an OTP (Offer to purchase) we have dotted them down below:

• YOUR INFORMATION:?Make sure your details have been captured correctly and completely.
• ALLOCATED TIME TO OBTAIN A BOND:?Make sure that you are comfortable with the timeframe provided in which you could obtain an approved bond. 4 working days should be acceptable.
• ESTATE AGENT FEES OR COMMISSIONS (IF AN ESTATE AGENT IS INVOLVED):?Remember, this individual could have put in a lot of work, or not, that’s for you to determine. Keep in mind that these professionals are also providing a professional service and need to generate an income every now and again.
• GENERAL TERM AND CONDITION / CONDITIONS OF SALE:?This can cause a lot of problems when dealing with a complex sale, or a sale where additional terms are just as important. Make sure to agree on terms prior to signing your OTP.
• SIGNING THE OFFER TO PURCHASE:?Make sure to have all pages signed by all defected role players. Role-players could include seller and partner (If required), purchaser and purchaser partner, and estate agent(s).
• GET YOUR OTP COPY:?Get a copy of the Offer To Purchase and provide it to the bank of choice or to the bond originator.?We’ll explain in detail below, read the next step…

Fifth Step

So, you’ve done some research, you’ve completed a budget, and used some fancy calculators to tell you what you could qualify for. You then started the search and smartly decided to get a few professionals involved. This resulted in you getting the ideal property based on your requirements, the estate agents have helped you get the OTP signed and ready.

What now?

Now you need an approved bond. So, many estate agents provide this as a value-added free service, and that’s great. If they are proven to provide reliable and trusted service, go ahead. There are however a few things you should know:

• Bond originators provide this service at no charge to the client.
• Interest rates would impact some recommendations in the background, so take a minute to think about that.
• You need personalized service to get the best interest rate in the shortest possible amount of time. Personalized service, meaning, you want a professional with industry experience that knows the ins and outs of their industry.

Doesn’t it make sense to apply with my bank? I mean, I have been banking with them for some time now.

In theory, yes, but it’s not that simple. Banks often fight to increase market share, and their willingness to sacrifice some profits in the process has been well published in the past. Putting these banks up against each other gives you the best opportunity to see what’s out there for you.

What happens after applying for a bond?

The banks would provide something called, approved in principle. And approved in principle basically states that you have been approved as a prospective client based on the personal, professional, and financial information obtained. Thereafter comes the property valuation, and this is done to confirm that the property value is adequate based on the selling price, almost a consumer protection mechanism in a way. All being equal, you should be fine.

So I received an “Approved In Principle”, whats next?

If all went according to plan, you should receive at least one final grant from a bank. If you are fortunate, you might have a few final grants, and that's amazing. Check interest rates and make your final decision.?Don’t be afraid to ask a few people for their opinions.

Sixth Step – Putting the final security measures in place to protect your newly acquired asset and personal finances

You have been through a lot up until this point, and you’ve done everything right.?Finally, you are on your way to becoming a homeowner.?From here, the process is simple, its recommended that you get at least two types of cover in place:

Recommended Insurance required when buying a house or investment property:

• BUILDING INSURANCE:?Building insurance basically covers the physical building in the event of damage or total loss. This protects that bank’s interest and you as the consumer. In most instances, this is a definite requirement. Getting the best possible quote doesn’t necessarily mean the best premiums, even though this is the biggest driving force when choosing insurance. You need something that would pay based on the actual requirements of the bank and of you, the client.
• RISK INSURANCE / LIFE COVER / LIFE POLICY:?Life cover isn’t always a requirement. In some instances it forms part of the bank conditions, essentially meaning you are required to get this in place prior to the bank providing a “Proceed”. The bond attorney would in most instances provide you, the client, with a short description of the bank’s minimum requirements, or the bank would provide a bond cover quote/policy for you. Either way, it’s up to you to make an informed decision. It’s most definitely recommended that you meet with a reputable financial advisor throughout the buying process.