The many benefits of home loan pre-qualification

Most people can’t buy a home without a home loan, and yet many people who make offers to purchase have no idea whether they will be granted a loan or not.

“This makes for a great deal of anxiety for both buyers and sellers, but it can easily be avoided if prospective buyers get loan pre-qualification from their banks or through their bond originators before they start viewing homes for sale,” says Gerhard Kotzé, MD of the RealNet estate agency group.

Most sale agreements contain a contingency clause that provides for the sale to be cancelled if the buyer cannot obtain the required home loan within a certain period. Such clauses are referred to as “suspensive conditions” and consumers should be on the lookout for this terminology in their sale agreements, he says.

“However, the majority of loan applications currently have to be submitted to more than one bank to secure approval, and the process can take much longer than anticipated in the sale agreement, with the result that many sellers are reluctant now to accept offers from buyers who have not been pre-qualified for a loan.

“They just don’t want to run the risk of taking their home off the market in the belief that it has been sold, only to find several weeks later that the prospective buyer’s home loan application has been refused and that they have to start marketing the property all over again.”

Kotzé says there are also other advantages for buyers who obtain loan pre-qualification, “including the fact that you will know your buying power, and can save time and money by viewing only homes that you can afford to buy.

“This will free you to also pay more attention to the features of each home you do view, to see if it meets your needs and preferences in other ways. In other words, you will be able to make sure you are getting the best value for your money.”

And finally, he says, obtaining loan pre-qualification puts buyers in a strong negotiating position, not only with sellers but also with the bank when it comes to getting the best interest rate on the loan itself – and potentially saving many thousands of rands on the total cost of your home over 20 or 30 years.

“The reason for this is that once you have been pre-qualified, the bank already knows that you are a low-risk borrower with a good credit record and score and a stable employment and financial situation, who can comfortably afford the monthly repayments on a certain loan amount and is most unlikely to default.” 

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 22 Jun 2018
      The rental market in many Johannesburg suburbs has shown encouraging signs of revival this year but it remains a competitive market and landlords who best cater to their market’s needs will reap the healthiest returns.
    • 22 Jun 2018
      Home design is constantly evolving to reflect the changing needs of society. We look at some of the ways in which our use of space is changing.
    • 22 Jun 2018
      While estate agents can help the seller with correctly pricing the property and marketing a property to the right pool of potential buyers, at the end of the day it’s the impression that the property will make on buyers that counts the most.
    • 21 Jun 2018
      Anyone who’s ever been involved in a building project that’s gone wrong will appreciate the importance of adequate insurance cover in the construction industry.
    • 21 Jun 2018
      A recent news story about a blind tenant caught in a legal battle with his body corporate over letters and notices he was unable to read and consequently comply with has raised the question: what are the legal obligations for landlords with disabled tenants?
    • 21 Jun 2018
      A trend that’s taken the world by storm in recent years is that of hygge (pronounced: hue-guh), a Danish concept that is about creating intimacy, connecting with loved ones and taking pleasure in small, ordinary things.
    • 20 Jun 2018
      Buying or selling real estate isn’t as easy as it is portrayed sometimes, especially if there is a death of a party during the transaction which can make it awkward, tricky and inconvenient.
    • 20 Jun 2018
      With interest rates remaining at historic lows and banks continuing to compete for mortgage finance business, first-time buyers with funds at their disposal are currently well-placed to gain that initial foothold on the property ladder, particularly in the light of the slightly lower growth rates currently experienced in residential property values.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us