You have seen the house that you want to buy; you have saved for the inevitable deposit, now are you ‘A’ for away or is it time to go to plan B?
Regardless of how well you think you understand the buying process, times have changed where even those with solid property portfolios have had to rethink the way they do business in the current economic climate. Theoretically, housing markets should be flourishing, with Interest rates at an all-time low, house prices generally lower and buyers enjoying vast choices. Despite the improving circumstances, the situation, simply put, is nowhere near as good as it should be.
The general opinion appears to indicate that the property boom experienced during the middle of the last decade has done buyers and sellers little favours. House prices spiralled to unprecedented levels resulting in pricing hundreds of thousands of ordinarily South Africans completely out of the market in many cases. The situation has, for the best part, returned to normality. Salaries have increased, housing prices have dropped to more affordable levels, so why then are so many people still battling to put a roof over their heads?
In the good old days, it was pretty easy for estate agents to determine the potential for a sale. If the buyer earned a certain amount, had stable employment and the banks could find value in the property being considered, it was basically a done deal. Then the National Credit Act came along and suddenly South Africans had to meet specific criteria to justify how they could afford the bond repayments, given the amount of credit they already enjoyed. These days everything including school fees, clothing accounts and credit card debt are considered before a home loan is granted. Despite the fact that the measures were put in place to protect a society that relied too heavily on credit – the new legislation tends to penalise those who are responsible borrowers.
Speak to any estate agent and they will tell you that banking policies appear to change all the time. What is deemed as an ideal bond candidate today may well not appeal to the banks tomorrow. Everyone seemingly is battling to come to grips with the situation – even those who have had years of expertise in the industry.
Regardless of how uncertain the situation appears to be, there are avenues of ensuring that those applying for mortgage finance are able to get it. Firstly the most obvious criterion is to keep your credit history squeaky clean. In the past, although a thorough credit history would be checked, banks would often overlook less serious credit lapses such as the late payment of doctor’s bills and the like. These days, clients may as well be applying for a post within the FBI, as everything is scrutinised under a financial microscope and anything and everything may count against you. Seemingly silly aspects, including the number of times you have applied for credit for the same home loan, are deemed problematic and can come back to haunt you. The days of shopping around with all the major banks trying to secure the best deal appear to be over with banks actually penalising those that do.
While it is important to have a credit history, those planning on buying a property should keep credit to an absolute minimum. Reduce unnecessary spending and think twice before opening new accounts. Pay everything in full, on time and if you can’t then discuss the problems with the credit provider concerned.
Keep your nose clean and your fingers crossed and you may end up owning the home of your dreams at a reasonable price. If you don’t you may find that you have to wait until global economic conditions improve, with the consequence of house prices starting to rise once again, before banks come back to the party and for you to qualify for that elusive bond.