Know how much you can afford before you start looking for your dream home

Interest rates have started to increase after two years of record-lows, but buying a home is still well within reach if you have a clear idea of what you can afford before you start looking at properties.

According to Carl Coetzee, CEO of BetterBond, bond approval depends largely on what you can afford, so it's important to have an idea of your recommended price range based on your income and expenses.

BetterBond's pre-approval certificate includes the purchase price you can afford  (but remember to buy slightly below this to allow for future interest rate increases), as well as your possible bond repayments based on various interest rate and deposit calculations. Not only will you start your home ownership journey off on the right foot, but you also have a better chance of having your bond approved.

"The approval rate for clients who pre-approved with BetterBond first is 90% of all applications submitted to banks on their behalf," says Coetzee. The pre-approval certificate will also indicate additional expenses, such as bond registration and transfer costs.

Pre-approval can be done online at no cost, and at a time that suits you or you can contact one of our experienced consultants. "You submit the same documents as you would for a bond application  (excluding the signed offer of course). And the information is captured by a consultant on the other end," says Coetzee.

As this information is stored on your profile, it can be used for your bond application if you sign an offer to purchase within three months of receiving pre-approval. "Also, the pre-approval application includes a credit check, so you will know whether you need to wait and improve your credit score before you apply for a bond. Having a good credit score will improve your chances of bond approval."

Although pre-approval does not mean that the bank has approved your bond application, it does give you a good indication of what the big banks will be willing to offer you based on your affordability, explains Coetzee.

"It also proves to the seller that you are a serious buyer with the financial means to buy the home. This will strengthen your hand when it comes to making an offer on your chosen home; giving you the competitive edge when the seller has to consider other offers."