Mortgage pre-qualification – why it can help you close the deal

In the property game there are two ideal scenarios. The first is a serious seller who is happy to price their property competitively. The second, a serious buyer with a clear idea of what they want. In these scenarios the chances of matching buyer and seller is strong.

But what about the rest of the market? Here it takes a little bit extra, and a pre-qualified mortgage application in the hands of the potential buyer could make the difference.

Morne Prinsloo, Chief Executive Officer at Mortgage Plus Bond Originators, said it could be this reassurance, provided in the form of an endorsed certificate from a recognised mortgage originator or similar accredited financial services provider, which sways the seller or in a case where it looks like competing offers may shortly be made for the same property, he said the pre-qualified certificate could clinch the deal for the buyer.

Historically most banks were prepared to do a formal home loan pre-approval, which basically guaranteed that the finance would be made available to the buyer on request.

“The banks have moved away from the pre-approval service because it requires them to go through a complete mortgage application process with very little client loyalty when taking up the bond. Historically the pre-approval took as long as an application. This resulted in duplication and bottlenecks in approving legitimate bond applications and so the banks stopped this service,” said Prinsloo.

To aid and inform homebuyers Mortgage Plus Bond Originators introduced formal and certificated pre-qualification. This is not the absolute guarantee offered in a pre-approved scenario, but it does detail the financing options available to a potential buyer subject to them meeting the bank’s lending criteria. Mortgage Plus uses similar credit scoring models as the banks in issuing its prequalification certificates.

As a result the number of Mortgage Plus pre-qualified clients not being granted a bond when formal bank application is made, is minimal. Pre-qualification really does give both the buyer and the seller peace of mind.

For buyers there are a number of advantages. First, it introduces them to the process of applying for a mortgage. This is particularly useful for first-time homebuyers. They get a clear indication of what they will be required to show the banks on formal application, and do not feel intimidated when the formal application gets underway. Buyers also get a clear view of their budget range and can house hunt accordingly. Once they have found their house, the process of originating a mortgage for them is quicker as the bulk of the required information is already on hand.

For the seller a pre-qualified mortgage certificate indicates a serious buyer. It indicates the buyer’s ability to secure funding. The pre-qualified buyer will in all likelihood, be granted finance swiftly.

Many sellers lock themselves into a sale and then wait for the buyer’s finance to be approved. If finance is not granted, the chances are the serious buyers have moved on and the seller has to start the marketing of their property from scratch.

Mortgage Plus has invested a significant amount in the technology and infrastructure required to provide pre-qualification certificates.

“Our team can generate a certificate in no time at all, and we’d be happy to assist any buyers with the process,”

Among the clutter of speculative offers to sell, and less than serious buyers, the pre-qualified certificate sends a clear signal of intent.

That might be all it takes to clinch the deal.

For further information contact Morne Prinsloo on 011 327 4489 or email morne@mortgagepluscc.co.za

If you would like to know more about your home loan services and mortgage requirements please phone the Mortgage Plus Head Office on:

Attached please find the Home Loan Application Form * - Short Home Loan Application Form

0861.11.11.93

info@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Many home loan middlemen are keen to help you choose. Mortgage Plus investigate:

There’s a new finger in the pie. He is the mortgage broker, what you might call a loan ranger. In recent months more than one mortgage broking business has suddenly appeared, bringing a new dimension to home loan business in South Africa. Until now estate agents have usually played the part of middlemen between banks and the general public. Unless the buyer has insisted on using his own bank, the agent will introduce him to a bank of his own choice and receive a nominal 0.5% commission for his influence. The practice has always been regarded as eminently fair as the commission has been lawfully earned and virtually any bank will pay it to him, ruling out price-war competitiveness or forced marketing influences.

The Loan Ranger – the New Middleman

Is there really a need for another middleman? Has the role of the individual estate agent come to an end? It all depends on how mortgage broking will actually be conducted. There could be great benefits if the practice results in new home buyers having a direct link to all banks through brokers acting principally in the interests of the individual as happens in countries like the United Kingdom and Australia. There established businesses advertise directly to the public, offering them the service of a wide knowledge of each particular bank’s products. The client has a freedom of choice after being advised of the various options to decide which product and bank to eventually utilize. Laws have been passed ensuring transparency in each broking business including an obligation to always disclose the financial benefit the broker expects to receive. In short,all mortgage brokers in South Africa and these other countries are accountable at law to the public for their activities.

We are seeing the beginning of what is likely to become a permanent feature of local home loan business practice. Already, however, there are signs that government intervention may be necessary if local mortgage broking is to become the healthy institution it is elsewhere in the world. Similar laws will have to be passed to regulate the conduct of brokers to prevent unhealthy elements creeping in which are not going to be in the interests of the general public.

Features of New South African Mortgage Broking

The new brokers operating locally belong to two different types. The first follows the universal practice of public advertising seeking to canvass potential clients directly for their bond business. You can find their services easily on the Internet and they are very clearly projected. Potential customers are encouraged to enter into a deal with the broking agency which places very few restrictions on them. The actual agreements read more like an information chart of how they work rather than a contract binding the client to their services. In fact no commitment comes until the client agrees to the terms and conditions of the financial institution granting him the loan. The broker undertakes to obtain offers from each of its participating banks within 48 hours and, once the client has accepted one of them, it will arrange a meeting with the relevant staff of the bank to process the loan application.

If they follow the universal practice these brokers will disclose their financial reward for their services, namely 0.35% of the total amount of the loan finally granted. They should not restrict their clients from canvassing other banks at the same time. Are there any drawbacks? The obvious weakness is if your mortgage application is only restricted to a few banks. As a client, you should insist that all banks receive your loan application-or be given the reasons why some are excluded.

Forced Marketing – the Other Type of Mortgage Broking

Then there is the second type – mortgage brokers intervening between banks and estate agencies to ensure business is directed to banks of their choice. Here, however, the involvement is not as transparent as it should be. These new loan rangers generally transact their business without visibility to the buyer who may be totally unaware of their presence or interest. They do not generally advertise to the public at large but conclude private deals on their own terms. They canvass principals of large estate agencies, negotiating deals whereby all the agency’s business is to go to them and through their influence to specific banks. Here the home loan application will not necessarily be directed to the bank offering the best product but the one prepared to pay the biggest bucks. Cases are already known of banks being prepared to offer up – to 1 % commission to these mortgage brokers for bond business. That’s quite – a whack! On a loan of R500 000,00 the bank will be prepared to pay out no ‘- less than R5000,00 for its A new business!

This practice is detrimental to good personal business relationships. The fresh air of healthy A competitiveness gives I way to the polluted atmosphere of forced marketing. Individual l agents working for I these agencies are I deprived of any right to influence the ultimate direction of the loan – application. Their recommendation comes no longer from personal experience of the banks offering the best products and after-sales service but from compulsion to use the institutions offering the highest commission.

Which Bank – The One with the Best Product or Biggest Commission?

As you can see many agencies will, in future, be selling their home loan influence to the highest bidders. You can be sure those bidders may well be banks that cannot rely exclusively on the quality of their service and products to net them their business. You will do yourself a huge favour by asking your agent whether his or her agency has an agreement with a mortgage broking agency through which it earns substantial commissions for using specific banks.

Today home loan consultants employed by banks are generally more trained, visible and available than they were before. Services and skills have been sharpened. Commission, however, is another matter entirely. They spoil healthy competitiveness. Banks which attract business through extravagant commission payments are forcing the market against the more acceptable face of mortgage broking – transparent dealings with the public where individuals have complete freedom to consider a wide range of mortgage packages with the broker earning a reasonable commission (up to 0.5%) for his services.

The Estate Agents’ Code of Conduct

All estate agents are bound by the Code of Conduct issued by the Estate Agency Affairs Board. In its October 1999 issue of its regular publication “Agent” the Board has given a reminder to all agencies of their responsibilities to the public in a short article headed Mortgage Broking. Agents may not deliberately“steer” buyers to financial institutions of their own choice through any improper influence. No agent may recommend one bank’s products or services over another purely to earn a commission. Payments of commissions to agents in the traditional manner have again been endorsed as perfectly fair. No obligation rests on the agent to disclose to the buyer that he will be I remunerated for directing bond business a certain way but no undue influence may be used to achieve this end. The agent’s role, first and foremost, is to offer advice on the best services available and to allow each buyer plenty of room to compare the various packages offered by the different banks.

Directing home loan applications to specific banks through mortgage broking agencies purely because of a private deal guaranteeing high commission payments would appear to be the very thing the Code of Conduct defines as unprofessional conduct.

Clients, Customers and Professional Service

What can you do to avoid becoming a victim of forced marketing? You will need to maintain a lookout for loan sharks lurking in the shadows. Conduct your business directly with a fully accredited home loan advisor or Bond Originator for example Morne Prinsloo at Mortgage Plus cc. Getting to know them personally paves the way for a long-term harmonious relationship.

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