Home Buyers Guide 4: What happens when your offer is accepted?
Congratulations, your offer on your new home has been accepted!
But what happens now?
After making an offer to purchase and having it accepted, it’s often thought that this is the last step towards buying a home. But this isn’t where the process ends, in fact, the journey has just begun.
Unless you are one of the lucky few who are able to pay cash for your new home, it’s likely that you’ll need to approach a finance lender for a home loan. The situation right now – the house isn’t yours yet as no money has been exchanged. Which means, now is the time to approach SA Home Loans.
Get the Ball Rolling
Buying a home is a big step, and probably one of the biggest financial commitments you’ll make. So there is quite a bit of paperwork necessary to get approval for a home loan and the first thing you need to do is ensure that you have all the necessary documents ready in order to apply for your bond.
From there, the process involves:
Step 1. Conduct a Credit Assessment
All financial lenders are required to lend money responsibly by making sure each applicant can afford the loan and don’t get into more debt than they can manage. .
So our credit team conducts an assessment using the supplied documentation as well as information from a credit bureau regarding your current credit status. If this is all in order, you’ll receive notification of approval of your bond application within 72 hours. This approval is subject to the completion of the valuation.
Your application may be declined at this stage, but don’t be afraid to ask for a detailed reason if this happens to you. It may have to do with your credit score, which can often be rectified with the correct credit behaviour over time, so it’s important to understand this so you can take action.
Step 2. Receive a Letter of Acceptance
If your credit check and property valuation goes off without a hitch, you’ll receive a letter of acceptance. This document contains all of the details involving costs, interest rates and predicted instalments.
Step 3: Transferring of Deed Titles
Also known as conveyancing, an attorney is assigned to prepare the necessary bond registration forms so they’re ready for you to sign on the dotted line.
Step 4: Lodgement
Lodging your bond registration at the Deeds Office is the next step, and will commence straight after you sign the required documentation at the attorneys. Once the loan is registered, the home is officially yours.
Remember, it’s important to maintain your good credit record throughout the process. Don’t take out additional loans and be sure to maintain all of your debt repayments. Your credit status will be checked before the final registration is done, and you don’t want all your hard work and application submissions to be rejected because your record has deteriorated. .
What Criteria are used when Assessing a Bond?
A credit check may feel invasive, but these detailed evaluations of your past and present spending and payment habits, how much you owe other lenders and how well you repay existing debts are necessary to ensure you can actually afford your dream home, so you won’t lose it once you have it.
So how can you be sure your bond application is approved? Measures we take when we assess your bond are:
- Loan to value (LTV) – This is one of the risk assessment tools that all lending institutions use. LTV is calculated by dividing the loan amount required by the value of the property. Assessments with high LTV’s are seen as higher risk and may attract a higher interest rate to cover this risk. You can lower your LTV by paying a deposit on your new home.
- Payment to Income (PTI) – Also known as Instalment to Income (ITI). This is the basic affordability measure in mortgage lending decisions. It’s determined by the ratio of your monthly bond instalment to your monthly income before taxes. As a general guide, your PTI should not exceed 30%.
How Long is This All Going to Take?
Generally, you can expect the entire process from bond approval to the deed transfer to take eight to twelve weeks.
What About Homeowner’s and Bond Protection Cover?
All lenders require buyers to take out homeowner’s insurance on the property. This means that your financial risk (the loan) is protected if your home is damaged in the event of an accident, fire, storms and burst geysers, among others.
Sectional title units include homeowner’s insurance in their monthly levies. But, you need to check with the body corporate that the insured amount is at least as much as that required by the lender.
Bond protection cover isn’t compulsory, but it is recommended it because it covers repayments of your bond instalments if you’re not able to due to death or disability.
Now that you know what lies ahead, our next blog in the Home Buyer’s Guide series covers exactly what documentation you need to get the application process started.BACK TO BLOG HOME>