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Tips on scoring home loan finance

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23 Aug 2012

South African single women account for approximately 9 percent of residential property buying while single men account for 8 percent, says FNB.

Clinton Martle, sales strategist at FNB Home Loans explains that although they do not have gender specific statistics on home loan applications, they are able to reveal that 9 percent of home buyers are single women, 8 percent single men with the balance made up of couples.

Clinton Martle, sales strategist at FNB Home Loans, explains that although they do not have gender specific statistics on home loan applications, they are able to reveal that 9 percent of home buyers are single women, 8 percent single men with the balance made up of couples.

Martle emphasises the point that whether men or women, all home loan applications are assessed on merit of income and security.

He says this is largely driven on the back of combined incomes affording more suitable larger type homes.

“By combining incomes, would-be buyers are able to buy properties better suited to their needs.”

Factors such as net disposable income and existing debt exposure coupled with living expenses all play a part in securing finance, he says.

Martle points out that since the implementation of the National Credit Act living expenses have become important aspects of assessing credit and often joint incomes are required to offset living expenses.

“Deposit requirements are also not driven on the back of gender and rather on the dynamics of the application assessed,” he says.

Factors such as supply and demand, upkeep and maintenance, credit profile and payment history are factors that will drive deposit requirements.

In the past two weeks, we have looked at ways of saving money and not relying on a man, and we also looked at ways of taking control of our money.

Now that these plans are firmly in place, it’s probably time to think about buying a home instead of renting one, provided you can afford it of course.

Low interest rates are making it easier for home buyers to enter the property market and banks have are also reportedly loosening their purse strings.

However, there are some reasons why banks reject home loan applications and Martle provides an easy guideline on what to do to prepare for that big purchase – your dream home.

He explains that the Property Leader program assists would-be buyers with the buying process upfront by pre-qualifying buyers and removing the uncertainty of ‘how much can I afford’ or ‘I hope they approve the amount I need’

While this article is mainly aimed at women (it being Women’s Month), home buying and home loan applications apply to anyone wanting to buy and own property.

Tips on scoring a home loan

1. Keep the amount of debt or short term spending commitments to a minimum

Clothing accounts, personal loans, overdrafts, credit cards and vehicle finance can erode the amount you could qualify for and it would be best to limit these, says Martle.

Having a credit facility available but not closing it still means that the credit is available and this would need to be considered when the person is applying for a home loan.

It is best to cancel or close unnecessary accounts if not being used.

Do not merely accept the annual limit increases on store accounts or credit cards due to being a good client as they can detract from the home loan amount you qualify for, he says.

2. Pay your monthly accounts on the due date

Try not to skip payments from month to month.

If an account is due on the 25th of the month, do not pay the account late as this will affect your credit rating, pay on time always.

If the minimum amount required is R500 pay the amount in full, not R300 or less as this will also reflect as part payment and detract from your overall credit score.

3. Watch out for the number of credit checks done on your profile

Martle says while it is important to shop around and make sure one is getting the best deal upfront, make sure you are aware of the number of credit checks done on your profile.

It is important to shop around for the most suitable property in your price range and don’t be pressured into buying ‘just outside’ of what you feel you can afford.

This indicates a need for credit and detracts from your overall credit score.

4. Avoid standing surety for others’ debt commitments

As far as possible avoid standing surety for others debt commitments as this is considered when raising finance on your side and will affect the amount you qualify for.

5. You salary and credit scoring

Pay your salary into an account monthly to build up a credit score with your bank.

Try not to use everything all the time and run your account on the minimum balance monthly.

This too is an indication that cash flow is tight and extra expenses could be a problem, he says.

5. Don’t overdraw your cheque account

Constant overdrawing of your account shows insufficient cash flow, which could raise the question about how you plan on servicing new debt if you can’t manage what is already there.

6. Open a savings account

Having a savings account is a good thing as it shows there is extra money available every month to use and also indicates a prudent savings habit.

7. Save for a deposit

Try to save up for a deposit of 5 percent (more is always a plus) before shopping for a home, he says.

It is a good indication that there is commitment to the asset and a responsible approach to buying a home.

8. Additional home costs savings

Make allowance for the additional costs of registration and all the fees linked to buying a home.

Depending on the purchase price the fees can be as much as 8 percent of the purchase price and this excludes the deposit on the property.

9. Shop around

It is important to shop around for the most suitable property in your price range and don’t be pressured into buying ‘just outside’ of what you feel you can afford.

Martle explains that whether one is buying an existing property or a new development, the deposit requirements will be determined by the applicant’s individual credit assessment and not only the property they are buying.

Stick to what’s affordable to you.

10. Employment

Being in stable employment and not ‘job hopping’ helps establish credibility and indicates stability.

11. Property location

Make sure the area you are considering is well maintained and an area where the demand to live in is good.

Drive around and look at the other properties in the area. Maintenance and upkeep of their properties is also important when trying to sell again.

Work with reputable agents and agencies. They are successful for a reason.

Do not only look at the home you want to buy, look at the safety aspects of the area, the amenities available, such as shopping centres, schools, hospitals, etc.

Resale must always be a consideration and things like this add value to the area.

Deposit and home loan application requirements

One of the frequently asked question is how much deposit can one expect to pay when applying for a home loan of say a property priced at R500k.

Martle explains that whether one is buying an existing property or a new development, the deposit requirements will be determined by the applicant's individual credit assessment and not only the property they are buying.

Factors that influence deposit requirements include the maintenance and upkeep of the property, supply and demand in the area they are looking to buy into and the would-be buyer’s credit history and profile.

He says once one has gone through all the steps above and feels confident of buying that dream home - it is time to approach the bank for financing.

If an account is due on the 25th of the month, do not pay the account late as this will affect your credit rating - pay on time always.

Information required, however, varies but the basic requirements include:

- latest proof of income

- copy of ID

- proof of residence

- a completed application form

- an offer to purchase

“This does vary from one applicant to another depending on the individual circumstances.”

Martle points out that while this seems like a simple exercise, no two home loan applications are the same - the factors considered when assessing an application for finance are specific to the applicant.

It is best to get the advice from the specialists in the industry and it is because of this that FNB Home Loans has recognised the fact that buying a property can be an intimidating process.

“From the time one decides to 'shop' until the loan applied for has been approved, can be a stressful period.

“It is because of this that we have introduced a first to the industry in the form of Property Leader.”

He explains that the Property Leader program assists would-be buyers with the buying process upfront by pre-qualifying buyers and removing the uncertainty of ‘how much can I afford’ or ‘I hope they approve the amount I need’

Do not only look at the home you want to buy, look at the safety aspects of the area, the amenities available, such as shopping centres, schools, hospitals, etc.

By going through the property leader program, FNB will issue an upfront certificate giving the applicant peace of mind knowing that the finance is largely secured, albeit subject to conditions such as the valuers’ assessment of the property one decides to buy, he says.

He says the shopping experience once you know that the finance is already largely taken care of, is so much more meaningful.

“We recognise the emotional roller coaster that applicants go through when looking for their dream home and we are able to help ease the load by removing some of the obstacles upfront.”

Over and above the upfront certificate, FNB also offers the applicant a network of recognised area specialists’ - estate agents who can help buyers shop for the house they are looking for.

“We educate would-be buyers about the home buying process to remove any concerns they may have about the financing of the properties.”

The bank also supplies in-depth information about the areas they are looking to purchase into in the form of area reports.

Area reports contain information such as the demographics of the area, average house prices, sizes of the erven, soil conditions, sales that have been registered in the area, points of interest and much more.

These are all available through the Property Leader program designed to assist with the buying and selling process, he adds. – Denise Mhlanga

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