Advice on increasing the chances of getting that home loan

BARDALE VILLAGE PROPERTY DEVELOPER ADVISES HOME BUYERS ON INCREASING THE CHANCES OF GETTING A HOME LOAN

New home buyers seeking bond finance are often not successful when submitting an application to a bank or financial institution for a home loan, says Peter Jones, group general manager of IHD (Integrated Housing Development). 

Even if the buyer has provided the bank with his ID, tax number, current payslip, proof of his current address, bank statements and had paid a deposit, IHD’s customers have over past two years experienced a low (30%) success rate when applying for loans at IHD’s Bardale Village development in Blue Downs, Cape Town. 

“Word has it that other property developments have experienced similar and even worse rates of success in other parts of South Africa,” he said.  

“The banks seem enthusiastic to grow their property home loan business, but why is the growth so slow?” he asks.

With only 30% of home loan applications succeeding, their sales could have grown by more than double if all applications were accepted.  Analysing the reasons for the banks declining applications reveal that the major reason is that property buyers fail to qualify due to a low credit score.

What does that credit scoring mean and how does it work? 

“Your credit score is based on your financial behaviour towards your creditors.  If you have paid your creditors on time and in full, have kept the balance owning on accounts under control, and handled all your accounts well, then your credit scoring will be good,” says Jones. 

If you have a longer credit history it tends to have a positive impact on your score.

Retail stores and banks’ default listings will remain on a credit profile for two years and any judgment against someone will remain on their profile for five years.  In many cases it’s better to get help from an experienced debt counsellor to clear a blacklisting, he said.  If the home buyer has debit orders against his account he must ensure that these are never rejected. 

A score of 660 or higher is considered to be a very good score.  Consumers with credit scores in this bracket have a higher chance of gaining access to home loan finance. 

Consumers with scores below 620 will find it more difficult to get credit as they will be regarded as “high risk”.

Most unsuccessful applicants put the blame on the banks and the National Credit Regulator but forget that the responsibility lies with their ability to keep their record clean.

“There is no place to hide in today’s new world of electronic database information sharing, so the best thing to do is ensure you have good record with all the creditors that you deal with.  Even small credit accounts will influence your credit score.

Financial planning has become increasingly essential for those looking to buy property and applying for home finance.  IHD has teamed up with a company that can offer potential home buyers with significant information about their credit history and the ability of qualifying for a home loan at absolutely no cost.

In addition to the credit check, they can assist with debt rehabilitation, improving credit scoring for those who previously applied for finance but were declined, as well as expert advice on becoming financially fit.

Home buyers should also consider consolidating their debit with one lending institution, which IHD can assist with.  This will warrant that buyers to get rid of bad debt with high interest rates and possibly free up some cash which could be used to save for a deposit or to pay for a larger home loan.  This deposit in turn will ensure that buyers get the lowest interest rates on offer from their lending institution.

How does one ensure a clean credit record?   

Paying credit accounts on the due date will increase your credit scoring.  This includes accounts such as credit cards, retail accounts, and instalments on loan accounts such as vehicle finance, personal loans and bond repayments. 

Should you owe money on any account it won’t necessarily lower your credit score, but some financial institutions might feel uneasy to loan additional credit to someone they feel is overextended.

In some cases it is better to have a small balance on an account than no balance, as long as the account is managed responsibly.

Avoid being close to using the maximum amount available on your credit card.

Opening many new accounts in a short time will negatively impact your credit score and be seen as a high risk.

Re-establishing credit on old mismanaged accounts and reinstating timeous payments will raise your score over a certain period of time (three to six months).

Any late-payments will reflect negatively on credit rating.

Do not ignore a legal letter from a creditor- act on it immediately.

IHD’s property consultants are ready to assist any home buyer a greater chance of successfully applying for a home loan and become a proud home owner, says Jones.
Please contact one of our sales agents on 021 909 0301 or www.bardalevillage.co.za.

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