Potential home buyers should pay attention to these factors which could impact their ability to qualify for home finance.
With interest rates at an all-time-low, first-time buyers might be considering their chances of entering the market. But, while the interest rate cuts might have stimulated interest among buyers, real estate services must be allowed to operate before these willing buyers are likely to purchase.
“As things stand, residential real estate services will only be made available at level two of lockdown. While the Deeds Office is open at level four and sales can technically be processed, there are various obstacles in the way that limit the possibility of concluding any new sales. As an industry that contributes about 5% of South Africa’s GDP and that employs 42,000 people in the residential sector alone, we urge government to reconsider their reclassification of the real estate industry so that real estate transactions can go ahead to give our economy a better chance for recovery,” says Adrian Goslett, Regional Owner & CEO for RE/MAX of Southern Africa.
For those potential buyers who are waiting for real estate services to re-open so they can view their dream home in person before putting in an offer, they should pay attention to several factors that could impact their ability to qualify for home finance. Taking these factors into consideration and monitoring spending can increase the chances of bond approval. Below, RE/MAX of Southern Africa outlines some spending habits to avoid to ensure future bond approval:
Keep an eye on your credit score
As difficult as it may be right now, aspiring buyers need to ensure that all debt repayments are made on time every month. Any late or missed payments will decrease the chances of bond approval and affect the interest rate the bank will provide on the loan. Aspiring buyers should also avoid applying for any additional credit over this time, as multiple credit enquiries will weaken their credit score.
Lower your debt
Disposable income is a key element to bond approval. A person’s debt-to-income ratio affects their affordability levels, which the bank uses to determine the bond amount and approval. Aspiring buyers will need to try and reduce their existing debt to below 30% of their credit limit to increase their chances of acquiring home financing.
Keep a stable employment history
Having permanent employment reflects a stable income, which is one of the factors lenders look at when considering bond applications. An employment record of at least 6-12 months would work in a buyer’s favour. If a buyer has recently been retrenched and has had to start a new job, the lender may regard them as a credit risk and might not approve the application.
Spend within your budget
Especially during these uncertain times, it is advisable to shop under budget to allow room for other expenses such as your rates, taxes, maintenance costs and, if you’ve chosen not to take a fixed interest rate on your bond, possible interest rate changes.