Home Loans – What You Need to Know…

Home Loans: If you have never purchased a home before it can be a daunting proposition. In this economy it can be even more intimidating to think about trying to secure financing.

All that you seem to hear is that financing is very difficult if not impossible to secure these days. However, just because it is scary does not mean that it is impossible.

If you are ready to purchase a home there are ways to get financing, but it is essential that you take the time to learn about home loans before you start to apply for them.

Before you start to apply for home loans you will need to take a solid look at your credit report. To many banks your credit score and history is the most important thing that they look at when they are deciding whether you are a good financial risk.

Your credit report can be listed with one of three reporting agencies. You will want to check with Experian, TransUnion, and XDS independently to be sure that you do not have any inaccuracies or errors on your report.

If you do find a mistake this will take a few months to correct so you want to do this prior to your deadline for receiving financing.

You must also take a very serious look at your budget. You need to understand exactly what your financial situation is and how much you can afford. A safe equation to think about is to take your annual gross income.

Then multiply that by 2.5. This will give you an approximate home value that you can afford. However, be sure that you factor in your monthly expenses like utilities, car payments, and food costs to be sure that you are not overextending yourself.

One way to make purchasing a home a more possible purchase is by putting down a deposit. Banks like to see that you are wiling to invest your own cash into a property as well. This deposit payment will go towards covering different fees like initiation, valuation, and legal fees.

Coming up with a substantial deposit payment can be difficult. Most lenders will give you a 100% home loan, but some ask that potential homebuyers come up with a 10% deposit.

That being said there are many different government programs that can allow you to put down a smaller deposit or that will help guarantee your deposit.

So, before applying for a home loan, think about your situation and ask your mortgage broker for advice. www.mortgagepluscc.co.za

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

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Email: morne@mortgagepluscc.co.za

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Hidden Costs in a Mortgage

Most every loan is going to have associated with it fees for insurance, valuation, etc. Most of these fees are commonly required amongst all lenders and they must give you a list of their costs associated with a mortgage. Despite the fact that the costs are disclosed, some lenders may include extraordinary “junk” fees in their costs that an unwary buyer may not recognize as an extra fee. At the time of a loan application lenders are required to give you a written closing cost estimate.

First, determine if you’re rate are being loaded. Some lenders advertise artificially low rates to attract customers but load up on fees to compensate for a lower rate. A tip off to a lender that charges hidden fees would be a lender who advertises interest rates that are appreciably lower than the competition. Interest rates are very competitive and shopping for the very best rate may in fact work to your disadvantage. Differences in rates of 1/8^th or 1/4^th of a percent result in very little difference in a payment and may be offset by poor service and added hidden fees.

Mortgage companies and fees. Mortgage companies often advertise that through their intervention the financial institution will subsidize the client’s bond registration fees. But, at what cost to the client? Saving R2 000 for example in bond registration fees, but ending up paying R200 000 more in interest is a great deal for the bank, but not for the client.

Mortgage companies are often owned by a bank or an estate agency. The real issue is a serious lack of independence and conflict of interest. Clients have no guarantee that their mortgage application will be channeled to the lender that offers the best interest rate instead of to the one offering the broker the highest commission. These fees will be subsidized by the banks customers in the form of higher charges and higher interest rates.

Always work with an mortgage firm that is independent from any bank and who’s services are FREE and without any premiums attached to the client like Mortgage Plus.

Correcting Past Credit Problems

Contrary to what you may have heard, credit reports are for the most part accurate. Common last names and a “Jnr.” in the family does cause a few problems but credit reports identify people by their identity number, address, and name. If you have an issue with your credit report, credit-reporting agencies are required to attempt to resolve the problem. Most of the information has to be provided by the individual and they should stay in touch for as long as it takes, frustrating or not. There are two main credit repositories in South Africa: Trans Union, and Experian. These companies each hold a database of information and provide it to a more local credit-reporting agency that may actually be issuing the report. If you have a dispute, you can go direct to the two repositories to attempt to clear the issue.

As mentioned before, credit scores in the 500 range can cause problems when attempting to obtain new credit. You can raise your score if the original information was incorrect, or you can over time improve your payment history, but it may take a few years of diligent payments to appreciably raise your credit score.

If worse comes to worse declaring bankruptcy  may be your only answer, but despite its growing popularity, I recommend it only as a very last resort. A bankruptcy will stay on your record for years and make obtaining credit difficult. There are two methods to declare bankruptcy: Voluntary and Compulsory Insolvency (bankruptcy). If your creditors have you sequestrated, this is known as compulsory sequestration. If, however, you decide to have yourself declared insolvent, such act is referred to as voluntary sequestration.

Should you not have yourself declared insolvent, but wait for your creditors to take the necessary action, there is a possibility that they will not succeed in their application for a court order. It may no longer be in their interest, on account of the fact that your assets are worth too little to them.

In the absence of compulsory sequestration, your debt simply increases further (as a result of interest), and your financial suffering is aggravated and endures for longer. The descriptions above are overly simple and general, but the bankruptcy option is a poor one and you should explore your options with an attorney before making a decision. After a period of time a rehabilitated insolvent may apply for credit, but this will depend on numerous factors. Most lenders state that at least a year must pass after a person’s been rehabilitated and a new good credit history must be established. A difficult chore, but it can be done. Make sure that rent or mortgage payments have no late payments for at least the previous 12 months. Avoid paying in cash; make all payments by check or credit card where your payment history can later be verified. It will also help to explain to your lender that the situation that originally caused the problem, a job loss, illness, etc., has now been resolved.

To learn more or if you’re interested in getting a loan, or are worried about debt, make an enquiry with Mortgage Plus at www.mortgagepluscc.co.za or call (011)327-4489 / morne@mortgagepluscc.co.za

How to manage your credit score and buy property

Weak economic conditions, higher interest rates and the global credit crisis have forced banks to be far more picky about who they will lend money and less generous with their lending rates.

But Mary Jane Lefevre, said that before you apply for a home loan, there are steps you can take to improve your credit status and encourage lenders to look more favourably on your application.

“Even those who know that they have a good credit history should request a copy of their credit record from ITC and Experian (contact details for these can be found on the web) to ensure that all information held on you is both accurate and up to date,” says Lefevre. “You can also approach an origination company such as Mortgage Plus who will, with your written consent, provide you with your credit records.”

Be aware that each time your credit record is accessed; it affects your overall credit score at the bank. Therefore don’t allow everyone and anyone to access your credit record.

• Sever old relationships

When you apply for credit, it isn’t just your details the potential lender will scour. They will also check the credit history of your spouse (if you are married in Community of Property) or any co applicant or surety you may apply with. Joint bank accounts, if not conducted correctly could have an adverse affect on your application and if you are divorced or separated, make sure you are not linked to any debt or open credit facility with your ex.

• Cancel out of date credit cards

Many people switch credit cards frequently but fail to cancel old agreements even if they no longer use the credit or retail card, these lines of credit will still appear on your file, which can make lenders wary about the potential size of your total debt – some may fear that you will “max out” these cards and then struggle to meet repayments. If you don’t need the full credit limit given on a card, ask your lender to reduce it. The same applies to retail credit.

• Build a track record

Banks want to see that you have a record of managing credit sensibly. So if you are a first-time buyer consider taking out a credit card six months before making your bond application. Of course, you’ll need to make sure that you pay off the balance in full each month, and on time, to avoid interest payments and to show that you are diligent with managing your debt.  Also, make sure your income is deposited monthly into a bank account as the banks will ask for proof of income via your bank statements.

• Ensure details are the truth

Make sure that information you provide on applications is accurate and truthful. Inconsistencies can have a negative effect on your credit score and you must be able to prove any income that you have declared.

• Include additional information

Where necessary, add further information about previous credit problems. If such problems were after redundancy or divorce, for example, and your financial situation has since improved, you can add a note explaining this. Likewise, if you have been a victim of identity fraud in the past, make sure that any credit problems caused by this are removed from your file.  Always keep proof of paying up any arrear debt and rescind judgments.  Companies such as ooba can help through services such as oobaassist, which will assist you through the process of clearing any negative credit records.

• Before you put in an offer, get pre-qualified

Even if you only plan to buy a property in six months time, start talking to a reputable bond originator like Mortgage Plus who is able to help you with any potential problem as well as prequalifying you on income less expenses and deductions. Mortgage Plus Bond Originators will also have solutions to any potential problems facing you in a tougher credit environment.

To get pre-qualified – Click Here