- 19
- Nov
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.
A second indication of our poor property market is that potential homeowners are finding it difficult to get financing. Banks are being very cautious because of the credit crisis, the National Credit Act and economic outlook. Even though the rate of home loan declines are down 1.4% it doesn’t really dent last months rate of 51%.
Another reason for banks to tighten their lending is the rising number of homeowners who are late on their installments. In the third quarter of this year alone, the number of loans more than two months behind rose 21.5%.
What choices does a potential homeowner have in today’s market? Remember that decline rates are different for each individual bank, so take the time and before giving up, try applying with other banks.
Another must, a sound credit rating. It is no longer enough to have a steady paycheck. 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.
Potential lenders want their patrons to be stable borrowers, with a solid history of debt payment. If you have this quality, it will be extremely helpful in your pursuit of a home loan.
Be honest about your credit history. It is best to let lenders know the truth about everything, even the rough spots you may have had. This allows them to work with you and see that you are truely serious about your obligations. Opening a savings account for your home deposit fund will also show how serious you are but usually require a 10% deposit, but that also varies bank to bank.
The goal that you are looking to achieve is to make your monthly installment less than 30% of your monthly income. You will not even be looked at by a bank if your installments are more than that.
When thought about all in one, the property market today is one filled with great amounts of frustration. In one corner you have sellers that are having a difficult time finding someone to buy their home, and may be forced to reduce their prices, which works out quite well for the buyer. Although it is getting increasingly harder for buyers to secure financing.
If you are able to handle the payments and have a steady, sufficient source of income, you should exhaust every option when it comes to getting a home loan.
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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