The only thing more frustrating than not being able to buy something you want, is buying it thinking you can afford it, only to find out later that you can’t.
Shopping for a property can be stressful. First you make a list of the important “must-haves”, and then you start browsing the property websites and newspapers, looking for suitable properties to view.
Once you’ve shortlisted the most suitable properties you then go through the process of making an offer, perhaps even counter-offering, until you settle on a contract. Out pops the champagne – you’re celebrating!
Or maybe not. Two weeks later you’re told by your bank or mortgage broker that you’re not being offered the finance you need in order to purchase. The sale falls through, and now you have to shop in a lower price range. It’s not much fun.
According to ooba, banks decline between 37% and 55% of all applications. So how can you avoid being a statistic and experiencing the disappointment of a failed bond application?
Quite simply, change the sequence. Get yourself pre-qualified before you start looking for a property. For one thing, you will be able to accurately determine what price range you are able to look in, and what cash you will need.
It’s very important that you find out, not just how much bond you will qualify for, but what “loan-to-value” (LTV) you may get. The LTV is the percentage of the purchase price a bank will lend you. So you may qualify for a bond of R 1.7 million, but perhaps not at 100% LTV. Perhaps your banks specifies they will only do a 90% loan, which means you would need to find the other 10% in cash.
And don’t forget the other fees, such as transfer duty, and attorney bond and transfer costs, which have just escalated.
If you are self-employed it’s unfortunately much harder to get a bond. You will need to get all your paperwork in order, including financial statements and management accounts. But going through this process up front will save you much time and possible heartache later on.
You need to also be aware that banks change their lending criteria, often monthly. So if you were qualified 3 months ago, perhaps today that’s changed. Banks also have changing appetites for lending – and their rates vary accordingly.
Using a mortgage originator like ooba can often be the difference between obtaining your bond, or not. In fact, ooba claims an approval rate of well over 70%. They will be able to tell you which bank would offer you the best deal, and qualify you accordingly.
An added benefit is that, if you have been pre-approved, your offer carries more weight with a seller who knows you are more likely to get your finance than another buyer who hasn’t gone through the process.
Principal of Harcourts Platinum, and Director of Harcourts South Africa
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