6 Tips for a successful mortgage application

As a young South African, buying property might not be at the forefront of your mind but with interest rates in South Africa relatively low and property prices at a realistic level compared to the recent boom, now is a great time to get onto the property ladder. And with banks granting first time home owners mortgages of up to 104%, you don’t need to spend years saving for a deposit.

When the time does come for you to apply for a mortgage, you don’t want to find out that you aren’t eligible because of a low or non-existent credit score. A bit of preparation can pay off in the long run and you should start considering what you can do now to make your mortgage application easier when you want to buy.

Make debt

A good credit rating is one of the most important factors in having a mortgage approved to finance a property. The only way to get a credit rating, ironically, is to have debt. Your overall credit rating is calculated according to a number of factors with different weightings, resulting in a score of between 300 and 800. As a general rule of thumb, your credit rating needs to be at least 640 for the banks to consider you credit-worthy and a low risk.

Then manage it well

Before you rush out and spend on credit, banks also want to see evidence that you can manage your debts well and pay them on time. So much so that the payment history on pre-existing loan accounts contributes 35% of your overall credit score and outstanding amounts owed contributes 30%.
Remember though that it is not only “formal” loans such as store cards, credit cards, student loans and car loans that contribute to your credit history. Not paying other bills such as traffic fines can also have a negative impact on your credit score.

Don’t wait, act now

Other factors that affect your credit rating are the length of your credit history, new credit accessed and the type of credit involved.
So, before buying a property, you should carefully build a good credit history by accessing appropriate debt and then managing it well.

Credit card conscious

One good way to do this is to use your credit card for expenses but then pay off the balance at the end of every month to avoid being charged interest. Another credit card-related tip is to never use more than 50% of the amount you have available to you. If you are constantly reaching your limit, this shows the bank that you are living right on the edge of your income.

Get a full-time job

Banks will insist the lender has been employed for at least a year, and will ask to see three months of salary slips, or six months of bank statements if you are self-employed.

Sooner rather than later

Property is a fixed asset that can grow substantially in value, so it can provide an important foundation for financial security in future. So, while the thought of a 20-year financial commitment might seem overwhelming to many young adults, especially if you have just achieved financial independence, there are many good reasons to get on the property ladder sooner rather than later.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Applying for Mortgages successfully has becoming increasingly difficult. With a worldwide financial downturn, the banks are clamping down to try to decrease their losses. With stricter procedures, many individuals are struggling to get the needed finance, either for buying a new property or a further bond on an existing property. So for individuals that need to apply for a mortgage, there are some steps they can take to increase their chances of an approval.

No. 1

Make sure you qualify

This is especially important if you are purchasing a new property. First find out what amount you can qualify for on a mortgage loan. Stay within this amount. A guaranteed way to have your application declined is by applying for more than you qualify for. The banks are not lenient with regards qualifying clients, and will not consider your application further.

No. 2

Mortgage Affordability

Go through your budget and see how much you can afford to pay on a bond. And be reasonable when doing this. If you can’t prove to the bank that you will be able to afford this new expense, they will say no. By granting Mortgages their clients can’t afford, the bank is running a big risk of not getting their money back. This is a risk they are not willing to take.

No. 3

Have a good credit/payment profile

Your credit profile is the first thing the bank will look at. From how you have serviced your existing commitments they will draw conclusions, and decide whether they feel you will meet your new commitments. So make your full payments on time. Too much debt can also affect your application. So if you can pay something off, this can help with both your exposure and affordability.

Approved Mortgages are not something impossible. With a bit of planning and common sense you are very likely to be successful with your application.

If you feel like it is too much to tackle an application on your own, there are professional mortgage consultants that can assist you.

If you want more advice I am happy to spend some time with you and answer any questions you have about choosing the best Mortgage for you. – Morne Prinsloo

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za