Thinking of buying your first home, here are some key things to consider

Buying property is one of the most important financial decisions one will make throughout their life journey. It involves a process that demands careful planning, diligent research, and attention to key factors that can ‘make or break’ your property buying prospects.

One crucial factor currently on the minds of many first-time buyers is the advantage of the 25-basis points interest rate cut on the 30^th of January this year. This follows the two 25 basis points rate cut each, in September and November of 2024, to lower the prime lending rate to a more favourable 11%. The much-anticipated rate cut cycle for the year brings about a positive outlook, for both the economy and South African citizens eagerly looking to buy or invest in property. 

Mfundo Mabaso, Product Head at FNB Home Structured Lending, says, “It’s important for home finance applicants to intentionally take the time to fully understand the process and requirements that need to be met when a bank assesses their home loan applications. This can go a long way in helping each applicant increase their prospects of successfully getting their home loan approved. At FNB, it is our mission to democratise home ownership and provide real help to South Africans who are considering investing in property.”

In line with the bank’s strategic focus on making home ownership a reality for the lower-income segment, FNB continues to improve access and affordability through tailored financial solutions. The bank offers solutions such as the First Home Finance (formerly known as Finance Linked Individual Subsidy Programme – FLISP) which is a government subsidy available to eligible low-income individuals buying their first homes, and the FNB Collective Buying Home Loan which enables up to 12 customers to purchase property and share monthly repayments.

Amidst South Africa’s low economic growth together with the increasing cost of living, we recognise that affordability is an issue for many households particularly those to 240 000 per annum or less than R7500. Through our tailored solutions, we are proud to have helped many of our customers overcome their affordability constraints and increase their chances of owning a home,” adds Mabaso.

Most first-time home buyers or property investors who want to apply for a home loan as part of their financial goals, this year, may find the requirements and process to be daunting as they eagerly await a positive response from their bank.  Between 2020 – 2024, FNB data shows that the majority of first-time home buyers were in the 23-35 age groups, with the average age being 35 for all paid-out home finance applications.

Here are some of the key things to consider for getting your home finance application approved:

• Check your credit score – Keep your credit score clean by ensuring that you pay all your monthly financial commitments in full and on time, this demonstrates to future lenders that you are a good customer grant credit to. FNB has Nav»Money on the banking App which allows customers to check their credit health while also allowing them to frequently monitor their proven track record before applying for a home finance.

General advisory is that potential homeowners need to check their credit scores regularly as they are allowed to get their credit profile free of charge and purchase reports for a minimal fee from the credit bureaus. A clean credit record is essential to getting credit such as a home loan with any financial institution.

• Get a home loan pre-approval – Getting a pre-approval ahead of your home loan application can help you get a good indication of what you could qualify for. This will help guide you in your search for a home that is within your budget. Prospective property buyers are advised to consult with their qualified financial advisors telephonically or in-person at their nearest bank branch. It’s important to note that FNB will assess income and expenditure as well as credit status in the pre-approval process.

• Check the valuation of the property – Before a home loan is approved, banks conduct their own valuation to ensure that the amount being borrowed is not far off from the market value of the property, in case the property is re-sold in the future. FNB also allows customers to proactively get a property and area report on the FNB App and online through Nav»Home. This will help you make a comparison to the details provided by the seller or real estate agent prior to the home loan application process.

In terms of where first-time home buyer’s homes are bought, FNB recorded that 55% of all properties are bought in Gauteng, followed by Western Cape at 19%. Furthermore, the bank’s data shows that the majority of first-time home buyers are Personal Banking customers with 6 out 10 home finance applications approved. Interestingly, 53% of all home loan applications are made by males, and the majority of applications are from black families.

• Saving up for a deposit – Having a substantial amount for a deposit demonstrates your ability to proactively save and increases your chances of getting approval in line with your positive credit score. FNB grants a significant pool of home loan applicants 100% on their approved home loans and the deposit paid upfront can be used for legal and transfer costs of the property or event home improvements at a later stage.

Ester Ochse, Product Head at FNB Integrated Advice, emphasises that “Saving enough for your home loan deposit, starts with determining the exact amount needed and setting a realistic monthly savings target for a certain period. With tools like Nav»Savings Goals, you can track your progress, adjust your savings approach, and stay motivated as you work towards your home-buying milestone. Naming the goal, “home deposit” will assist with keeping you focused on the goal. It’s also important to continue saving for unforeseen expenses that come with being a homeowner or property investor.”

• Avoid taking on additional debt – With the third interest rate cut, many consumers may fall into the trap of thinking that the extra money in their pockets is chance to take up more debt – which not advisable. People mistakenly assume that banks only monitor their credit profiles and perform updated affordability checks prior to the home loan approval process. Banks check for at least three months until the property registration process ends. Therefore, taking on additional debt or defaulting against credit providers can result in the bank repricing and, in extreme cases, declining the loan altogether.

“If you qualify financially and have met all the above requirements, then you are one step closer to getting approval and ultimately owning the house of your dreams or the investment property you want. We remain optimistic that the South African economy will continue to gather momentum for a more extensive interest rate cutting cycle which will be very beneficial to homeowners or property investors,” concludes Mabaso.