Applying for a home loan can be a daunting experience. The first and most crucial step towards owning a home is acquiring the necessary funding to afford the purchase. To ensure a successful application, there are a few steps buyers can follow to secure the required capital at the best possible interest rate.

“A home is one of the largest purchases a person will make,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. “That’s why this purchase should never be undertaken lightly. I strongly encourage homeowners to do research and to make the necessary plans to ensure that they can afford the commitment. Doing so will alleviate unnecessary stress and will unlock greater financial freedom that comes from making a smart real estate investment,” he advises.

  1. Know your position

Before the house hunting can even begin, buyers need to have a thorough understanding of what they can afford. It is crucial to develop an accurate picture of your income, expenses, assets, and liabilities (debts). If a buyer does not have a budget set up already, printing out three months’ worth of bank statements can prove helpful in this regard. After evaluating your finances, decide how much you can afford to spend on bond repayments each month – keep in mind that owning a home comes with other monthly expenses that renting might not include, such as municipal rates and complex levies, for example.

READ MORE: Four common mistakes for new home buyers to avoid

  1. Be patient

Buyers should be mindful that buying a home does not happen overnight. It can sometimes take years of careful saving and / or paying down debts before you are in a position to buy. Once you start exploring the option of buying, questions usually arise around saving for a deposit and transfer duties (which can easily amount to hundreds of thousands of rands) versus paying off other debts with their savings first to improve their borrowing capacity. The answer to this will vary from person to person but, in general, it is usually better to pay down debts first if the person has limited cash flows. If the debts are at a manageable level that does not affect cash flows, then it might be better to put the money towards a savings account to build up a deposit and the necessary funds to cover bond registration costs and transfer duties. Meeting with a financial advisor and a bond originator can help buyers develop a plan that is tailored to their individual circumstances. Buyers then need to diligently stick to their financial plan and be patient while they build themselves into a better financial position.

  1. Shop around for the best rates

Once a buyer has the necessary savings in place, it is time to approach financial institutions. The mistake many buyers make is that they fail to shop around and tend to simply apply for a loan through their chosen bank. But, if they had taken the time to enquire at a few banks, they might have been able to negotiate a better deal with a lower interest rate. The savings might seem insignificant when you are weighing up prime plus 1% versus prime plus 1.25%, for example, but those 25 basis points can end up saving you hundreds of thousands of Rand in interest charges over the span of your twenty-year home loan, so it is well worth taking the time to shop around. Using a bond origination service, such as BetterBond, can simplify this process for you, which will save you time and money in the long run.

Once buyers are ready to purchase, Goslett recommends getting pre approval on a home loan before they start the house hunting process. “This shows the seller that the buyer is in a serious position to purchase, which can increase the chances of their offer being accepted, especially if there are other offers on the table. Involving a real estate professional can also speed up the process of finding their dream home, as estate agents are often privy to homes before they even hit the market. When you are ready to buy, I’d recommend contacting your nearest RE/MAX Office to help you secure your dream home,” Goslett concludes

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