The Market is Ripe for First-Time Property Buyers

The Market is Ripe for First-Time Property Buyers

Steadily growing house prices and the fact that banks are looking more favourably on first-time buyers make it a good time to get a foothold on the property ladder. However, while conditions are improving, it's still important for first-time buyers to get all their ducks in a row before making an offer.

According to ooba's latest statistics, June was the 14th consecutive month of price growth for first-time property buyers, and the eighth consecutive month of growth in overall residential property prices. The average price paid by first-time buyers in June is up 13% to R682,042 from the same month the prior year, and 52% of the home loan applications received by ooba in June were from first-time buyers.

"This shows that first-time buyers have a healthy appetite for property right now," says Kevin Mountjoy, ooba national sales manager. "Given that banks have eased their lending criteria, the current interest rate looks set to remain stable at these current low levels, and house prices are increasing, this makes it a good time for prospective buyers to get into the property market."

Mountjoy explains, however, that banks are far more likely to grant a homeloan at a favourable interest rate if the buyer is able to offer a deposit. He says that first time homebuyers need to be mindful of the following tips before starting the homebuying process:

1. Check your credit rating

The first thing that any bank will do when assessing your home loan application is check your credit rating. To avoid any nasty surprises or deal with any unresolved matters, you should check your rating before you get started. You are entitled to check your credit rating for free once a year. An ooba homeloan consultant can assist you with this.

2. Work out what you can afford

"Analyse your income and expenses very carefully to work out what you can afford," says Mountjoy. "Bear in mind that home ownership comes with additional expenses and responsibilities beyond merely paying a bond. You will need to repair and furnish your new home, and additional expenses always crop up." 

You can use an online calculator like the ooba calculator ( to work out exactly how much you can afford to spend. You can also get pre-qualified for a loan by an ooba homeloans consultant so that you can make offers on property with confidence.

3. Consider the interest rate

Interest rates look set to remain low for the time being, but it is always worth calculating what the difference in your bond repayments would be should the rate fluctuate. There should always be room in your budget for upward growth - especially if you buy when the interest rates are low.

4. Save up for a deposit

Banks are far more likely to grant a home loan if you have a deposit saved up. "It's good to aim at saving between 10% and 20% of the purchase price, although obviously the more you can offer, the better your chances of approval of your home loan, and at a favourable rate," says Mountjoy.

5. Learn about location

They say it's better to buy the worst house in a great area than the best house in a bad area. Look at the prices in the location you're considering and work out if you can afford to buy there. If not, try neighbouring areas. Consider your daily route to work, proximity to friends and family, proximity to good schools (even if you don't have children yet) and the crime rate. It also helps to spend time driving around the area in the daytime and at night to get a feeling for the kinds of people, noise levels and security concerns.

6. Inspect the property carefully

Don't let your excitement about owning a new home prevent you from being cautious. "When you're considering a property, you should check for cracks, water pressure problems, missing tiles, holes in the roof, wiring problems and anything else that will need fixing or replacement," says Mountjoy. "It is the buyers' responsibility to acquaint themselves with the condition of the home, so make sure you've been thorough."

7. Get your documents in order

Making an offer on a home and applying for a bond involves paperwork. This can be daunting, but the consultant who handles your application will guide you through it. To start your home loan application process, you will need at least the following documents: 

- Your latest payslips and bank statements 

- An Income and Expenditure statement (your consultant can help you with this)

- A Statement of Assets and Liabilities (and this)

- If you are not a SA citizen, copy of residence and work permits, otherwise

- Your SA identity document

8. Shop around for the best deal on your bond

When you are ready to make an offer on a property, it makes sense to apply for a bond from more than one bank. This allows you to be sure that you have the best opportunity for an approval, and at a favourable interest rate. ooba statistics show that 48.1% of first applications were declined in June 2012, however 27.9% of those applications declined by one lender were approved by another. This shows over 1 in 4 applications would have remained declined if the applicant had only applied to one institution. 

"This is where the assistance of an expert mortgage originator like ooba is invaluable," says Mountjoy. "At no cost to you, they will present your application to a number of different banks in the best possible light. You only have to fill out the paper work once to cast as wide a net as possible in pursuit of the best deal."

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Steadily growing house prices and the fact that banks are looking more favourably on first-time buyers make it a good time to get a foothold on the property ladder. However, while conditions are improving, it's still important for first-time buyers to get all their ducks in a row before making an offer.

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