select
|

Good pre-qualification - the way to obtaining home mortgage finance

The demand for home mortgage finance is growing stronger month by month - but those involved in helping the public still find that they are up against a surprising amount of ignorance and misinformation among clients, says Mike van Alphen, National Manager of the Rawson Property Group’s bond origination division, Rawson Finance.

Some clients, he said, still approach bond originators or their banks expecting to get a loan at below prime rate, i.e. below 8.5%. This was possible when rates were at 12 to 15 percent but such loans are very seldom approved today.

“One has to appreciate that with the prime rate now so low, the bank’s ability to profit from bonds is reduced. It is illogical to expect them to agree to a sub-prime rate on today’s very low rates.”

Those who do achieve a loan at, say, 0,5% below prime, said van Alphen, almost invariably have impeccable credit ratings and are usually able to put down a 20% or larger deposit.

Although the banks have been criticised for this, says van Alphen, it is also perfectly reasonable for them to charge one or two percent above prime on affordable housing, the reason for this being that the risk associated with loans in this category have been shown historically to be higher than most.

The last year, said van Alphen, has time and again shown that it is essential to pre-qualify for a bond before you start looking for a home.

“Certain members of the public,” said van Alphen, “are driven around a whole range of suburbs, looking at a wide range of homes, only to find out later that they do not qualify for 80% of the stock that is being shown to them.”

For this reason, he said, many astute estate agents today insist that applicants are prequalified before they start home viewings.

A good bond originator, he said, will get a 95 to 100% acceptance rate on his bond applications, and on average, his division will achieve ten to 15 or more successful applications each month. This is because the client’s financial and credit position has been thoroughly investigated at the outset and if necessary been rectified, with the result that the application conforms exactly to what the banks expect. 

If the client has a blemished credit record, this too, can often be rectified, although the process is likely to delay the application by six months.

To achieve a good hit rate, said van Alphen, it is absolutely essential to assemble all the documentation at the outset. The file should almost certainly include pay slips and bank statements over a three to six month period, as well as certain other vital information.

If the applicant is self-employed and trading as a CC or a company, is it essential that he pays himself a monthly salary and keeps a record of this for six months. The salary deposits would need to reflect in the applicant’s bank account if he has not done this in the past, he should delay his application by half a year and start doing it as soon as possible. 

“It is not good enough to simply show that the CC or company is profitable. The bank will want to know exactly how much of the profit goes to the bond applicant.”

Sometimes, said van Alphen, an applicant will go straight to the bank with his application, which will be accepted by the first rung staff, quite possibly with minimum documentation attached. Subsequently, the applicant may find that the credit investigators at a higher level at the bank want additional information and then are quite likely to reject the request.

“Hopes are then dashed and the applicant goes away very disappointed.”

One reason for this, said van Alphen, is that the applicant may be dealing with an expert banking consultant able to advise on a wide range of banking investment subjects, but possibly not completely familiar with the bank’s bond award criteria. By way of contrast, he said, bond originators are focussed on this one field and are experts in it.

Van Alphen concluded his remarks by saying that whatever route the applicant takes he should not be discouraged if at first his application is rejected.

“As I have tried to point out, this is often the result of the application being incorrectly put together and this does happen when the person assisting the client, whether at the bank or elsewhere, is not yet an expert in this subject.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 18 Jan 2018
      The Southern Suburbs make up some of the most popular residential areas in Cape Town, comprising charming groups of suburbs which lie to the south-east of the slopes of Table Mountain. It is seen as the city's most expensive residential neighbourhoods with a choice of various private schools, upmarket eateries, wine estates, beautiful homes and trendy apartments.
    • 18 Jan 2018
      New year, new goals! If you’ve resolved to purchase your first property in 2018, then this 6-step guide from the Rawson Property Group is a must-read. It will help you navigate and simplify what is often be seen as a confusing process of buying your first home – right from the house-hunt to the house-warming.
    • 17 Jan 2018
      While the current property market may still favour buyers, it doesn’t mean that they shouldn’t be well prepared before putting in an offer to purchase.
    • 17 Jan 2018
      Lightstone lists Blair Atholl as the most expensive suburb with an average house price of R11.2 million, followed by Westcliff (R10.5 million), Dunkeld (R9.3 million), Sandhurst (R9.1 million) and Inanda (R7.2 million).
    • 17 Jan 2018
      As it currently stands, there are four main ways in which a home can be bought in South Africa, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who adds that deciding in which legal entity to purchase the property is not a decision that should be entered into lightly, as each has its pros and cons.
    • 16 Jan 2018
      The start of the new year is symbolic of new beginnings. A good time to take stock of one’s possessions as well as how necessary they actually are. However, seeing as the process may appear daunting – a plan goes a long way.
    • 16 Jan 2018
      The Western Cape is still in the throes of a severe drought and many households have to adjust the way they use and save water. It is a little more complicated in sectional title schemes, however, as it is not that easy to implement grey water systems for multiple users and it is also difficult to monitor water usage accurately if there are no separate water meters
    • 15 Jan 2018
      In ideal rental situations, when a lease is signed the tenant will stay for the full duration of his lease without any complications and the landlord will uphold his obligations, creating a win-win situation for tenant and landlord.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK