When applying for a home loan, it’s not just the buyer’s affordability that needs to be ascertained, it’s the buyer’s credit and payment profile that will be checked carefully and if there is the slightest chance that he has “black marks” against him the bond application will be rejected
Become credit fit before you apply for a home loan
The National Credit Act made it possible for all consumers to request a free copy of their credit report from the credit bureau every year. Your credit report is accorded a significant weighting during the bond evaluation process. It is one of the main factors that influences whether you qualify for credit or not. In conjunction to your bank credit record as to how you conduct your banking account. This will determine the amount you qualify for and the interest rate that you will pay. Maintaining a good credit record and paying all your accounts on time is very important. Do not short pay on any monthly installment as this too will effect your retail credit track record.
Increase your disposable income
The criteria for affordability has changed and the banks now use your nett disposable income to calculate the amount of bond finance you qualify for. Your disposable income, which is the amount of money you have left after meeting all your financial commitments each month, can be increased by repaying a greater installment than required on personal loans and smaller debts. By reducing your monthly financial expenses by R1300 per month you will increase your home loan spending limit by a full R100 000.00.
Obtain a pre-approval home loan certificate
To avoid disappointment we will give you pre-approval, which is in principle a decision to see what you can qualify for but is subject to affordability, credit bureau track record and subject to the banks valuation of the property you decide to purchase. At least it will give you an approximate idea of what amount you could purchase for.
Make provision for the extra costs
Your home loan is not only additional monthly expense you will face when buying a home. You will also have to pay rates and taxes, homeowners insurance and if your existing life cover is insufficient, additional life insurance premiums. Be sure to budget for these. You will also have to make provision for further interest rate increases. You may contact us to advise you on fixed rates opposed to a variable interest rate option.
A home loan is a long term commitment
Seeing that bonds are calculated over a 20 or 30 year term, it is important to understand how you can save on the interest rate you pay and how to go about reducing the repayment term. The mortgage industry is constantly changing and it is therefore very good practice to be educated in respect of saving thousands of rands of interest by making additional voluntary payments into your bond whenever possible.