Frequently Asked Questions for First-Time Buyers and Investors

Buying a home is one of the most crucial decisions one will ever have to make in their lifetime. If done right, one has a lot to gain. As a first-time buyer, you want to make the least expensive decision and get the most out of it. So more often than not, a person will ask many questions.

We have compiled a list of the five most commonly asked questions by first-time buyers and investors, with answers to suit.

Here are the five most frequently asked questions by first-time buyers

1. How much do I need to save to buy a house?

So this is obviously one question on your mind as you are looking to buy a house. As you prepare to buy your first house, it is essential to look into several factors. Particularly those that will affect the price of the house. Some of these factors include; 

Location. Houses in good neighbourhoods and communities, close to employment opportunities, good schools, highways, and urban centres, tend to command steep prices.

Type of property. The type of house you want to buy determines its price. Apartments and condominiums may be more expensive than semi-detached houses in some instances because they come with amenities such as security, fitness centres, state-of-the-art features and more.

Maintenance. The age and condition of the home at the time of purchase will impact the cost of repairs and maintenance.

An excellent way to acquire a home is to save at least 25% of the asking price in cash for a down payment, closing costs, and moving expenses. Most lenders require down payments that range from 10 to 30%. The more you deposit, the less you’ll pay interest and fees.

2. What are the different kinds of home loans?

Several kinds of home loans are available, and each comes with a different interest rate, repayment period and other fees. Here are some of the most common types of home loans in Africa:

Fixed-rate loan – This loan has a fixed interest rate throughout the loan term. The rate remains fixed whether market rates go up or down. It is the most popular, though often more expensive than variable home loans. 

Variable home loans – Variable home loans, also called floating or adjustable rate mortgages, have their interest rate attached to the base home loan rate, which may go up and down, depending on the fluctuating credit market rates.

First-time buyer’s loan – First-time buyer’s home loans are prevalent among first-time homebuyers who want to invest in their first home but do not have the money to put down a deposit. Banks and other lenders are open to lending more than 100% of the purchase price, including registration and transfer costs.

Land loan – This is given to those looking to purchase land for personal or commercial reasons.

Construction loan – If you own a piece of land and have no money for construction, banks may loan you the money. The funds are often paid directly to the contractor undertaking the construction.

Equity Release loan – This is the equity built up in your property. You can use it as a loan to finance personal/ business needs.

Step-down home loan – Step-down home loans are popular among homeowners close to retirement. With this type of loan, the rate offered to you by the bank is gradually lowered every year or six months. 

3. What should you look for when searching for a home?

As you buy your first house, you want to ensure you get a good deal. Look out for features that are within your preference and current or future life situation. For example, the size of your house can depend on whether you have a family or plan on starting one.

Neighbourhood. As you narrow down on the house you want, choose your potential house in a neighbourhood ideally located to all necessary amenities and infrastructure. For example, good schools if you have kids or plan to, and shopping centres for your grocery and home needs. Also, check out local crime rates to ensure you and your family feel safe when you move in.

Proximity to your workplace. The distance between your home and your workplace can be a significant consideration. Shorter distances are pretty convenient regarding transport costs and commute time.

Property Type and Design. Other good qualities to look for in a home are room sizes, storage space and an aesthetically pleasing design. If you have any special features important to you, search for homes with those features. 

4. How do I know if I’m financially stable to purchase a home?

The housing market has been volatile since the 2020 pandemic, and you might wonder if it’s the best time to purchase your first home.

Truthfully, it’s always a great time to buy real estate because this is your chance to build equity and invest in the future. The current market should not hold you back if you can afford a home and your credit is good.

5. How can I find the best lender?

Though it can be daunting to find the best lender, it’s actually not that hard. Just use some simple strategies to help narrow down your search. You can start by determining which banks are close to where you live and if they offer mortgages. Then, read online reviews about the lender’s past customers to see their happiness. You can also call a few of them and ask about their experience to get a good idea of your potential lender’s attitude.

You can also look up offers from the government, like competitive loan programs for first-time homebuyers. Once you have done some preliminary research, it is time for the hard work: comparing the rates offered by each lender.

Here are the five most frequently asked questions by property investors.

Finding the right property for investors can be quite tricky because there are so many different factors to consider. Investors need to know their budget, what they want in a property and where they would like to buy before looking at specific properties.

1. What is your financial goal?

Investors must decide what the most critical aspect of their investment property is. First, they must consider whether to be part-time or fully invested in the investment property. They also have to determine if they want a buy-and-hold or flip property.

Before purchasing a home, first-time investors must consider the rental demand, cash flow, net worth, and creditworthiness.

2. Can one start real estate investing with little or no money?

An investor can start real estate investing without money. You may have land and no money. In this case, you can consider partnering with someone else to put up the construction costs for a share of the property.

One can also consider property crowdfunding, where different individuals contribute a fraction of the property value as an investment.

Another option is to purchase a property in instalment plans through rent-to-own investment options.

Lastly, one can also consider selling property on behalf of developers, and owners, with time investing proceeds of their earnings into real estate.

3. What are the benefits of owning a property?

The main benefit of investing in real estate is that you can expect higher returns since value increases over time.

Investing in properties situated in good locations will increase your property’s value.

Real estate also remains one of the safest yet most lucrative investments. Setbacks are always bound to happen, but you can be sure of growth in the long run.

4. How much money do you need to invest in real estate?

Investing in real estate depends on how much startup capital you can raise and your financial goal. Knowing your financial stand and objectives helps you understand how much you will spend.

The costs of purchasing a new home can vary depending on the location, type of home, and down payment. Costs can include fees for legal counselling, transfer tax, land registry fee, legal work and fees for public notaries. 

5. How do I determine the value of an investment?

People frequently ask this question when planning to buy a new investment property. Before you purchase a property, calculate the property’s value so you can make a wise investment.

Market value – This can be found by comparing the values of other properties in the neighbourhood. The data can be found from realtors or tax assessment offices and valuers.

Replacement cost – The construction cost plus the value of the land, minus any depreciation costs, gives you an evaluation of the property, especially if you cannot get actual market value from comparable properties.

Capitalization Rate – This and cash-on-cash return figures will help you determine the viability of the investment, especially if it’s a mortgage payment.

Buying a house can be exciting and daunting, but we’re here to help. If you’re buying your first home or even if this is the hundredth time you’ve gone through the process, more questions come up than answers (we get it).

We want to provide some insight into what other first-time buyers ask when buying houses so you don’t feel alone in this.

Please contact ARE to guide you on your home purchase or investment.