When it comes to financial and life goals, buying a house is probably pretty high up on your list. If you know that owning a home is a goal you want to achieve, put yourself in the best situation to do so, as early as possible. You can financially prepare for home ownership years in advance.
Here, we’ll discuss all the financial aspects of buying a house so you can be sure you’re ready to go house hunting!
- Assess your situation to know how much you can afford
What does your current financial situation look like? What type of money are you bringing in? What forms of debt do you have, and what do they add up to? How does your savings look?
If you think you are financially ready for a home, based on your income, savings, and lack of debt, create a budget as if you were paying for a bond. Do some research on the average bond prices in your area. Now, factor that average bond price into your budget. See how budgeting with a bond works for a few months.
Is it really tight? Giving yourself a trial budget in preparation for owning a home can help you see if you truly can afford a bond payment. A home is a big decision, so if you can’t handle it, it’s best to know before you get one.
- Have 20% saved for a house down – payment
Can’t make a 20% down payment? Expect to pay more in interest.
To build up a down payment, open up a bank account specific to saving for your new home, and calculate how much money you’ll need. Then, build your savings into your budget so that every month you have a plan to save toward your down payment.
Download Free Homebuyer’s Checklist Infographic HERE
- Have all your financial documentation in order
Prepare your financial records, because your lender is going to want to see them to approve you for a bond. When it comes time to applying for home loan, your payslips, bank statements, financials, and lots more will be on display. So have this documentation handy and current to provide to your lenders when they ask for it.
- Be knowledgeable about Home Loan Options
Be sure to shop around for a bond and determine what type of bond works best for you.
A variable interest rate means your home loan interest rate can go up or down depending on the prime market rate, which is determined by the actions of the South African Reserve Bank. A fixed rate means your rate is fixed regardless of market fluctuations.
It’s a good idea to keep your bond payments no higher than 30% of your income.
- Prepare for other associated costs
This one is a biggie! Buying a new home isn’t just about a bond payment.
Be prepared to pay for your transfer costs, moving costs and decor, repairs and maintenance, utilities, house insurance and levies (If it’s a complex).
Plan to factor these costs into your budget as you save toward buying your new home.
Homeownership is great, and it’s definitely something to consider including in your wealth portfolio. But remember it is also a huge financial responsibility therefore you have to make sure you are 100% committed and plan accordingly.
Are you thinking of buying your first home? Have you already purchased your first home? Let me know in the comments below to some of your tips and experiences with the home-buying process or what are you doing to help you get closer to owning that home.