Buying Your First Home: What First-Time Buyers Need to Know
The Property Perspective is a weekly radio show on 919 FM, airing every Tuesday at 4:15 PM with Al and Lesedi on The Drive Train.
Episode 22 | The Property Perspective with Etchells & Young
Buying your first home is exciting, but the process should start long before you begin scrolling through property listings.
In Episode 22 of The Property Perspective on 919 FM, Harry is joined by Justin from ooba Home Loans to look at the first-time buying journey from both the property and finance perspectives.
They discuss how to understand what you can realistically afford, what pre-qualification actually means, choosing the right first property and what happens once you're ready to make an offer.
In This Episode
Harry and Justin take first-time buyers through some of the most important decisions to make before and during the home-buying process.
They discuss:
What first-time buyers should do before viewing properties
What home loan pre-qualification actually tells you
Affordability versus maximum bond qualification
Why qualifying for R2 million does not mean you should spend R2 million
Choosing between sectional title and freehold
Location, resale potential and buying the right first property
Understanding the Offer to Purchase before signing
How the bond application process works
Watch Episode 22
The Property Perspective airs weekly on 919 FM.
Start With a Plan, Not a Property Search
It can be tempting to start browsing homes as soon as you decide you want to buy.
Harry recommends starting somewhere else: with a plan.
Before falling in love with a property, understand your finances, get a realistic idea of what you can afford and start thinking about what you actually need from your first home.
Doing the groundwork first makes the property search far more focused and reduces the risk of chasing homes that are outside your budget.
Get Pre-Qualified Before You Start Viewing
Justin explains that one of the most valuable early steps for a first-time buyer is understanding their buying power.
A pre-qualification looks at factors such as your income, existing debt, monthly expenses and credit profile to estimate what level of home loan you may be able to afford.
That gives you a realistic price range before you start shopping and helps make the property search considerably more productive.
Does Pre-Qualification Guarantee a Bond?
No.
Justin explains that pre-qualification is an affordability assessment based on the information supplied by the buyer.
It can include a credit check, income verification, existing contractual obligations and an assessment of the surplus income available each month.
It provides a useful indication of buying power, but the final home loan application still needs to be assessed and approved by the bank.
Don't Treat Your Maximum Qualification as a Spending Target
If you qualify for a R2 million home loan, that does not necessarily mean you should immediately start shopping for a R2 million property.
Harry suggests viewing that figure as a ceiling rather than a target.
Your bond repayment is only one of the costs of owning the property. Transfer-related expenses, levies, rates and taxes, insurance and ongoing maintenance all need to fit into your monthly budget too.
Leaving yourself some breathing room can make home ownership considerably more comfortable.
Affordability Is More Than Your Monthly Bond
A bank needs to look at more than your salary when considering how much you can borrow.
Justin explains that your income, debt commitments, normal household expenses and the amount left over at the end of the month all contribute to the affordability assessment.
Buyers also need to consider the additional expenses attached to the property itself.
The objective should not be to stretch the budget until there is nothing left at the end of each month.
What Type of Property Should a First-Time Buyer Choose?
Start with your location and lifestyle.
Think about where you work, the areas that suit your daily routine and what type of property is realistically available within your budget.
Harry suggests that a smaller home in a sought-after area can sometimes be a better first step than stretching the budget for a much larger property.
Buyers should also understand the differences between sectional title and freehold ownership, including the different costs and responsibilities that can come with each.
Your First Home Does Not Have to Be Your Forever Home
Your first property is likely to be one step in a much longer property journey.
Harry encourages buyers to think about resale potential as well as their current needs.
Life changes. Careers change, families grow and buyers eventually move, upgrade or relocate.
A well-chosen first property should meet your needs now while still being attractive to another buyer when you're ready for the next step.
Location Still Matters
Price is important, but buying the wrong property in the wrong location simply because it is affordable can create problems later.
Consider access to work, schools where relevant, shops, transport routes and the amenities you use regularly.
Justin also highlights the importance of thinking about future resale value.
Your first property should suit your budget, but it should also make sense as an asset you may eventually need to sell.
Buy Within Your Means
One of the biggest mistakes a first-time buyer can make is allowing the dream property to push them right to the edge of affordability.
The fact that a property may technically qualify for finance does not automatically mean it is going to be comfortable to own.
Budget realistically and allow for the rest of your life to continue after the debit order for the bond comes off each month.
Found the Property? Understand the Offer Before Signing
Once you find a property you want to buy, the next major step is the Offer to Purchase.
Harry recommends going through the agreement carefully with the property practitioner and asking as many questions as necessary.
Understand the terms, conditions and obligations before you sign.
It is far easier to clarify something before submitting an offer than to discover months later that you misunderstood an important part of the agreement.
What Happens During the Bond Application?
Once the Offer to Purchase has been signed, the home loan application can be prepared for submission.
Justin explains that supporting documentation is collected to verify the buyer's income and affordability before the application is submitted to lenders.
A bond originator can submit the application to several banks rather than approaching only one lender.
The different offers can then be compared based on factors such as the approved loan amount, interest rate and other benefits attached to the finance.
Don't Assume Your Own Bank Will Give You the Best Deal
Buyers often assume that the bank they have used for years will naturally provide the best home loan offer.
Harry recommends keeping your options open.
Different banks may assess the same applicant differently, and comparing several offers can provide an opportunity to secure a better rate, loan amount or overall finance package.
Have Your Financial Documents Ready
Good preparation can make the bond application process considerably smoother.
Justin recommends ensuring that salary slips, bank statements and other supporting documents are current and ready for submission.
Self-employed buyers or those purchasing through a legal entity may need additional financial documentation.
Preparing this information before you urgently need it can prevent delays once you've found the property you want.
What Difference Can a Deposit Make?
Buyers should understand how their available cash can affect the overall home loan application.
Justin explains that a buyer contributing a deposit is taking some of the financial risk in the transaction themselves.
Depending on the application and lender, that may positively influence the terms offered by the bank.
Buyers should therefore discuss how using a deposit may affect the loan, interest rate and monthly repayment before deciding how to structure the purchase.
Remember the Upfront Buying Costs
First-time buyers should also budget for the costs associated with getting the property transferred and the bond registered.
The purchase price and deposit are not necessarily the only cash amounts required during the transaction.
Establish what costs apply to the specific purchase early so that they do not become an unexpected problem once the transaction is already underway.
A Key Takeaway
Your first home does not need to be your biggest home, your dream home or your forever home.
It needs to be the right first move.
Start with the finances. Know what you can realistically afford. Choose a property that suits your current needs while keeping resale potential in mind, and make sure you understand the agreement and financing process before committing.
Getting the first purchase right creates a much stronger foundation for wherever your property journey takes you next.
What Is The Property Perspective?
The Property Perspective is Etchells & Young's weekly property segment on 919 FM.
Each episode explores a different aspect of property - from rentals and property management to buying, selling, legislation, sectional title living and the everyday questions property owners and tenants face.
Follow the series as we unpack more of the issues that matter to Johannesburg property owners, buyers, sellers, landlords and tenants.
Ready to Buy Your First Home?
From finding the right area and property to understanding the Offer to Purchase and navigating the buying process, having experienced guidance can make your first property purchase far less daunting.
Speak to the Etchells & Young team when you're ready to start looking for your first home across Johannesburg's northern suburbs.
