Friday, June 12, 2009

Am I ready to buy a home?

You have decided that now is the time you would like to purchase your own home when prices of houses have dropped due to the current worldwide economic crisis, but are you really ready to buy that dream home now?
Here are some factors to consider before purchasing a home:

Do you have a reliable and steady source of income, namely a job? Have you been employed on a regular basis for at least 2 – 3 years?

Credit Health
A credit check will be done on you once you apply for a home loan. Do you have a good credit record? Do you pay your bills each month and on time?

What are your finances? To find out, do a budget. The budget will tell you what money is coming in and where it is going. It will tell you what are your needs, wants and can afford.

Other Debt
Do you have any outstanding debt like car payments or personal loans? Now would be a good time to consider debt consolidation. It makes no sense saving up for a deposit (with low interest rates) for a new home when you are being swamped with high interest rates on your current debt.

It would be wise to pay that debt off first, and save yourself money (on interest payments) in the long run. Have a look at your budget. You may have to make some sacrifices and any unnecessary spending will show up in this budget. Use that money towards your debt payments.

Home Affordability
From your budget plan, you will be able to see what money will be available for buying a new home.

You will need to pay a deposit of between 10% – 20% depending on your criteria and the bank that will grant you the loan. In addition to that, you will need to pay home loan costs. The home loan costs are: transfer fees, bond costs and the initiation fee.

It was announced this week that 3 of the top banks in South Africa are now offering 100% home loans.

Once you have bought a home, other costs will be incurred like home insurance, household insurance, security, home improvements, rates, water, electricity, etc.

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