28 Jan 2013
A Property24 reader asks:
I qualified to get a home loan but I was declined because of my credit profile. They say I have got many commitments, but I know I can afford to pay monthly instalments - I did the calculations for the home loan. The problem is that my accounts are not cleared but they are fully paid.
So can you tell me what steps to take to rectify my position and how to check my credit profile?
Lending institutions consider affordability very carefully when assessing whether a home loan may be granted. During the assessment process net income is considered against expenses reflected in the banking account statements and personal credit report. The exact amount ascribed to monthly expenses can sometimes be in dispute. Lending institutions can only work with the information at hand.
In my experience it is best for clients to spend time with a home loans consultant to go over their income and expenses by referring to the relevant documentation. When application is made for a loan a credit report is requested, with thepermission of the client.
It is important to understand that it is the responsibility of the client to state income and expenses. It is the best to do this in person with a home loans consultant so that there is no guesswork involved and the assessment is based on factual information. This is one of the reasons why, at SA Home Loans, we interact directly with our clients at application to ensure that they are clearly understood.
Interest rates are at an all time low, which also has a potential impact on affordability. Lending institutions have to take into account that interest rates may escalate at some point and the client should be in a position to financially absorb such increases, however unlikely it may seem.
Proving sufficient income is also a factor. One may earn additional income in cash that cannot be proved. Self employed applicants also sometimes find that their financial statements and banking account records do not tie up or support their stated income, so they are unable to prove that they can afford a loan.
My advice to the reader is to make an appointment with a home loans consultant to discuss their particular situation.If the reader does not qualify the consultant should be able to provide guidance as to what the reader’s situation should be in order to qualify. One can then work towards improving the information and / or the situation.
The reader can also check his own credit profile by going to the TransUnion website.
Readers may submit questions to Property24’s Guest Expert panel and/or comment below. We may not be able to answer all questions received, but all will be considered.
Gustav ZwiegelaarGustav is the Regional Manager at SA Home Loans in the Western Cape. He started his career in public service and in 2003 joined SA Home Loans as a sales consultant where he quickly found his stride. Gustav enjoys public speaking, has hosted radio talks and regularly writes on home loan related matters.
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