With house prices firmly back on an upward trend and banks beginning to relax their lending criteria for home loans, consumers are increasingly looking to get back onto the housing ladder.

As the property market becomes more competitive, however, it is vital for consumers to make sure they are well prepared and can act quickly when an offer is accepted.

Craig Deats – has the following advice for potential homebuyers when applying for a home loan to ensure they have the ultimate opportunity for success on their bond applications.

1. Make sure you are aware of all the costs involved in buying a home. In addition to arranging a home loan and paying a deposit there are a number of other costs involved including legal costs, transfer duty, bond registration fee and bank charges. These will need to be paid in order to complete the process.

2. It is advisable to have a clean credit record before applying for a home loan. As a result of the National Credit Act and current market conditions, banks have tightened their lending criteria and a negative credit record may impact the result of your home loan application.

3. Provide your bank or bond originator upfront with all required information and documentation requested. Each bank has their own set of criteria so ensure that you have met the requirements of each lender.

4. Make use of a reputable bond originator, who can assist you by facilitating bond negotiations with all major lenders in one simple process from prequalification to registration, with less hassle and minimal paperwork. They also provide regular feedback of progress on your application.- www.mortgagepluscc.co.za 

5. Shop around with multiple lenders. According to the latest statistics, 19.8% of applications in January 2010 that were declined by one lender were approved by another, indicating that it is important to approach multiple lenders to ensure a positive outcome on your home loan. Shopping around also ensures that you get the best rate on offer.

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With more than 40% of all home loan applications still being declined in December 2009, potential homeowners may still be finding it tough to obtain financing. However, the decline ratio is expected to fall as a result of the gradual improvement expected in the local property market in 2010.

Latest figures  show that 42% of home loan applications were ultimately rejected by banks in December 2009.

According to Rhys Dyer, the current decline rates are well above the effective 20% decline ratio experienced during the heady days of 2003 to 2006, a time of strong property market conditions.

“These decline rates were, however, prior to the introduction of the National Credit Act (NCA). Our view is that the introduction of the NCA has influenced decline rates on a structural basis and it is unlikely that we will see decline rates at these historic lows again. There is however significant scope for improvement from current levels with property market recovery over the short term.”

Dyer says lack of affordability still remains a key reason for high decline ratios.

“Affordability under the NCA is measured by net disposable income. Consumers need to show sufficient net income after tax, living expenses and the repayment of other debt to afford the bond repayment. With many consumers having been hit hard by the economic recession, and the increases in the cost of living they simply cannot meet these criteria.

“Many consumers are also recovering from an overhang of historic debt and a high percentage still have impaired credit records,” says Dyer.

Dyer says that because every bank applies different credit criteria in assessing a home loan, it is essential that consumers shop around and don’t merely accept the credit decision from only one institution. Almost a fifth of ooba’s home loan applications that were declined by one lender in December 2009 were accepted by another lender.

“Further to the credit criteria, there is also the issue of pricing. Pricing between banks remains a key reason to shop around. The rates being offered to the same client may vary from bank to bank.

He says that in the current environment, using a reputable bond originator is a useful way to improve the chances of a successful home loan application.

“Bond originators can assist in shopping around to the different banks and ensure that all the required information is obtained and correctly reflected before submission of the home loan. As each bank has differing requirements in terms of their application information, bond originators have developed systems to ensure that once the information is obtained from the customer it is systematically formatted to meet each bank’s application formats and requirements. This saves the consumer from having to go through a separate and time consuming application process with each bank.”

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