South Africa is not immune to the current global credit crisis, and the evidence is showing in a couple of ways. First, home prices are dropping. According to statistics released by bond originator ooba, home prices have fallen 6.6 percent overall compared to October last year. In real terms, that means the averaged home priced at R803,908 last October would only be able to sell for R751,118 in October of this year.
A second indication of our poor property market is that potential homeowners are finding it difficult to get financing. Banks are being very cautious because of the credit crisis, the National Credit Act and economic outlook. Even though the rate of home loan declines are down 1.4% it doesn’t really dent last months rate of 51%.
Another reason that banks are clamping down on their lending is because of the increasing number of late payments by homeowners. In just the third quarter of the present year, loans that were more than two months late increased by 21.5%.
What is a potential homeowner to do in this market? It is important to note that decline rates vary from one bank to another, so take the time to try applying with other banks before you give up completely.
Home loan applicants must be able to prove that you can make your installment payments and that you have not been late or defaulted on any other payments for at least two years before making your home loan application. Another must, a sound credit rating. It is no longer enough just to have a steady paycheck.
Potential lenders want their patrons to be stable borrowers, with a solid history of debt payment. If you have this quality, it will be extremely helpful in your pursuit of a home loan.
If your past is not the greatest, it is beneficial to be honest. If you had problems in your credit history lenders appreciate when a borrow states the truth instead of lying. Also, if you open a savings fund in order to gain a home deposit fund, you are showing signs of serious financial obligation. Yet, dig into details because the average deposit requirements stands at 10 percent, but varies in different banks.
The goal that you are looking to achieve is to make your monthly installment less than 30% of your monthly income. You will not even be looked at by a bank if your installments are more than that.
When thought about all in one, the property market today is one filled with great amounts of frustration. In one corner you have sellers that are having a difficult time finding someone to buy their home, and may be forced to reduce their prices, which works out quite well for the buyer. Although it is getting increasingly harder for buyers to secure financing.
As a potential buyer, it is really worth your while to explore every avenue to get a home loan as long as you can afford the payments and your job is stable enough to allow the commitment.
Tom Martens is the content coordinator for South Arica’s leading Homeloans portal which amongst others offers origination services for ABSA home loans
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