If you made a conscious decision to improve yourself or an aspect of your life on the 1st of January then you’re among hundreds of thousands of people setting New Year’s resolutions and goals.
What better way to start a new year than committing to targets that will positively affect your life or the lives of those around you, in particular, those surrounding your financial wellness.
Is your number one New Year’s resolution to own a home? If yes, your top priority this year should be financially fit! The current economic climate may seem daunting, but with the correct planning and preparation in place the home-buying process will become a lot easier to navigate and manage. Particularly for apprehensive first-time buyers applying for a home loan!
Forget dieting, dedicate yourself to financial discipline!
Aspirant homeowners are encouraged to strengthen their purchasing power by actively improving their credit profile in the eyes of a financial institution. This can be done in a number of different ways and will ensure that you are in the best position possible to have your bond approved.
A significant factor affecting bond approval is the applicant‘s disposable income. This is the amount of money a person has available to spend after expenses have been deducted. Financial institutions will thoroughly asses the applicant’s financial strength, affordability and commitment to repayments; all of which can be improved by maximising and stabilising their disposable income. Examples of this are paying credit cards bills, installment payments and rent on time and in full every month, settling debt quickly and living beneath your means, as opposed to within them to allow for saving.
Banks will also consider the applicant’s overall career security and the stability of their position against the industry average. When filling out your application, ensure your earnings reflect correctly on the payslips you submit and that all documents and supporting information is accurate and in order beforehand – this is invaluable to the approval process. Whether or not you are SARs compliant also has an effect.
Prioritise your expenses so that those of highest importance are paid first, such as your home loan and credit card bills. Wherever and whenever possible pay more than what is required of your monthly installment so as to settle your accounts faster; the longer you take to pay off an installment, the more you end up paying on interest. It goes without saying then that even a small additional amount paid every month will make a surprisingly large difference in what is owed. Banks will look favorably on this.
Although seemingly tedious, accurate budgeting is essential to purchasing a home and should ideally be done before viewing potential properties. The home-buying process begins with determining what you want in terms of what, where and when. Budgeting refines this with regard to what you can afford both in the short and long term.
A comprehensive budget should clearly outline monthly bond repayments and household expenses suchas food and utilities, taking into account initial costs related to home-buying like transfer costs, interest, attorney fees and insurance. This is of great benefit to home loan applicants both in terms of personal financial peace-of-mind and in the home loan process. Banks assess an applicant’s money management ability and their commitment to a preset budget.
Commitment to your financial goals should motivate your performance and ability to stick to them!
Another healthy financial habit to adopt this year is to commit to saving 5-10% of your monthly net income. As to purchasing a property, the savings can go towards the deposit, transfer costs or other unexpected expenses that may crop up along the way.
Arriving with a bond pre-approval in hand from an accredited bond originator or financial institution will strengthen your offer to purchase. Although it won’t guarantee a granted bond, it is a good indication of what you’re able to comfortably afford. There are many online tools and applications available for you to determine the loan amount you qualify for.
Being mindful of what you’re spending your money on and how much you’re spending do not necessarily mean depriving yourself of things that make you happy; however, should you wish to apply for a home loan, your single most important goal for 2016 should be to exercise financial discipline and in doing so, strengthen your purchasing power.