HomeLoans Tips
There is mounting evidence that even South Africa is not immune to the current credit crisis that is affecting the entire globe. It should be mentioned first that home prices are continually dropping. Statistics that were releases by bond originator ooba state that the home prices have fallen 6.6 percent overall compared to last October. Broken down into simple terms, it basically means that a house that is sold last year would have brought R803,908, would only bring in R751,118 in October of this year.
The second indication of the poor property market is that potential homeowners are finding it increasingly difficult to get financing for their properties. Banks are being cautious in light of the credit crisis, the National Credit Act and deteriorating economic outlook. Though the rate of home loan declines were down slightly, 1.4 percent, it doesn’t really dent last month’s rate of 51 percent.
Another reason that banks are clamping down on their lending is because of the increasing number of late payments by homeowners. In just the third quarter of the present year, loans that were more than two months late increased by 21.5%.
What is a potential homeowner to do in this market? It is important to note that decline rates vary from one bank to another, so take the time to try applying with other banks before you give up completely.
Home loan applicants must be able to prove that you can make your installment payments and that you have not been late or defaulted on any other payments for at least two years before making your home loan application. Another must, a sound credit rating. It is no longer enough just to have a steady paycheck.
Lenders are looking for stability in their borrowers, as evidenced through a good record of paying of credit card debt. A history that shows you have already successfully managed a home loan will also go a long way with lenders.
If your history is not stellar, it is best to be honest. Lenders appreciate a borrower who is upfront about a rough spot in his credit history instead of trying to cover it up. Also, show that you are serious about your financial obligations by opening savings account for the express purpose of building a home deposit fund. The average deposit requirement is 10 percent, but this can vary from bank to bank, so do your research.
The maximum your monthly installment should be is 30% of your total income, and it is better if it is less. Banks won’t give you a second look if you don’t meet this prerequisite.
On the one hand, sellers are having a difficult time finding buyers and are being forced to accept lower offers, which is great news for buyers. On the other hand, potential buyers are struggling to secure financing. All in all, today’s property market is fraught with frustration.
As a potential buyer, it is really worth your while to explore every avenue to get a home loan as long as you can afford the payments and your job is stable enough to allow the commitment.
Tom Martens is the content coordinator for South Arica’s leading Homeloans portal which amongst others offers origination services for ABSA home loans
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Tagged with: Bonds • finance • Home Financing • Home Loan • Home loans • Homeloans • investment • money • mortgages • property • property investment
Filed under: Home Loan
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