An easy way for homebuyers to get a better deal in South Africa
Category Advice
Getting pre-approval for a home loan can seriously improve the position of homebuyers in South Africa.
According to Seeff's Tiaan Pretorius, pre-approval will give a buyer better bargaining power, and pre-approval also makes the offer stand out compared to buyers who are not pre-approved.
Seeff's Gerhard van der Linde added it is best to make an offer which is as "clean" as possible.
The fewer restrictive conditions in an offer, the better the chance of it being accepted by the seller.
Buyers can also shop for a home with confidence, knowing the exact amount that they can afford.
Sellers are also more likely to accept the offer if they think that you are a serious buyer, helping you negotiate a potentially better price as you are a qualified buyer.
Buyers can get pre-approval at a bank or can use a mortgage originator such as ooba.
The pre-approval should still be done formally, not simply through an online test to see if you qualify. The formal process takes into consideration a credit and risk assessment.
A credit history will need to be built over a period of time to show that you can pay on time and do not skip payments, and it should also show that you do not overextend on credit, as this will hurt your credit score.
If you have any defaults on your record, you will need to wait a few months for them to be corrected before applying for home loan pre-qualification.
Ooba said that a credit score of at least 610 is needed to qualify for a home loan, and a score above 661 is considered good.
Moreover, as a rule of thumb, the home loan repayment should not be more than one-third of one's monthly income.
Spouses or partners buying together should add their incomes together so that the assessment can be done on their combined income.
A list of expenses will also need to be included to show that you have enough surplus income to cover the home loan repayment amount.
"Once you have the pre-approval you can then start house hunting with confidence. Although the bank will again do an assessment once the offer to purchase is accepted by the seller, it does put you in the front of the queue as a prospective homebuyer," said Seeff.
That said, the buyer must maintain their credit and not take out any further debt until the transfer of the property is registered.
"The banks can do another credit assessment and if anything adverse shows up, it could put you at risk."
Author: Businesstech