It may be more difficult to obtain a home loan now but it is still possible. There is still money available for those with substantial deposits, good credit records and reliable incomes.
However, says Nationlink estate agency group chairman Dr Piet Botha, home loan applicants can take nothing for granted at the moment. Even if they think they’re in good financial shape they should be prepared to get the runaround from very cautious lenders.
“At last count the growth in the value of new home loans granted showed a decline of almost 17% year-on-year, and not all of that fall is due to lack of homebuyer demand,” he says.
“Many people who could have qualified for a loan last year no longer do. And with house prices stating to show real declines, many homes no longer offer the same security for loans that they once did. This is one reason the banks have been withdrawing some home loans that they had already approved.”
And things will only get easier, says Botha, when the housing market is seen to have has stablised, when defaults start to decline and prices start to rise once more.
“As it is, lenders are now often asking not only for proof of income but for confirmation from employers that potential borrowers are likely to stay employed. They have also become a lot more sceptical about bonuses, commissions and consulting fees as sources of regular income.”
Overall, borrowers are getting the message loud and clear that the rules for getting a home loan have changed, specifically in regard to the necessity of a deposit if they want to get a good rate of interest, he says.
“People are seeing plenty of opportunities to buy, especially in areas where prices have come down drastically, but they are battling to organise the financing. In fact, we are starting to see that coming up with the cash needed for a deposit and transfer costs is in many cases now a bigger hurdle to home ownership than actual property prices.”
So what should would-be borrowers do? “Beg and borrow, scrimp and save to put together a deposit,” says Botha, “and the bigger the better. Be prepared to make some compromises on where you decide to buy, and make sure you have the best credit record possible. And finally, seek help from an experienced and assertive mortgage originator who will negotiate hard to get you the best home loan package.”