Get pre-qualified for a home loan

home-loanThe demand for home mortgage finance is growing stronger month by month but those involved in helping the public still find that they are up against a surprising amount of ignorance and misinformation among clients.

This is according to Mike van Alphen, National Manager of the Rawson Property Group’s bond origination division, Rawson Finance, who says some clients still approach bond originators or their banks expecting to get a loan at below prime rate, i.e. below 8.5 percent. This was possible when rates were at 12 to 15 percent but such loans are seldom approved today.

He says one has to appreciate that with the prime rate now so low, the bank’s ability to profit from bonds is reduced. He says it is illogical to expect them to agree to a sub-prime rate on today’s low rates.

Those who do achieve a loan at say 0.5 percent below prime almost invariably have impeccable credit ratings and are usually able to put down a 20 percent or larger deposit, he says.

Van Alphen says although the banks have been criticised for this, it is also perfectly reasonable for them to charge one or two percent above prime on affordable housing, the reason for this being that the risk associated with loans in this category has historically been higher than most.

He says time and again, it has been shown that it is essential to pre-qualify for a bond before you start looking for a home.

“Certain members of the public are driven around a whole range of suburbs, looking at a wide range of homes, only to find out later that they do not qualify for 80 percent of the stock that is being shown to them.”

For this reason, he says, many estate agents insist that applicants are pre-qualified before they start home viewings.

He says a good bond originator will get a 95 to 100 percent acceptance rate on his bond applications, and on average, his division will achieve 10 to 15 or more successful applications each month. This is because the client’s financial and credit position has been thoroughly investigated at the outset and if necessary, been rectified, with the result that the application conforms exactly to what the banks expect.

If the client has a blemished credit record, this too, can often be rectified, although the process is likely to delay the application by six months.

To achieve a good hit rate, Van Alphen says, it is essential to assemble all the documentation at the outset. The file should almost certainly include pay slips and bank statements over a three to six month period, as well as certain other vital information.

If the applicant is self-employed and trading as a CC or a company, it is essential that he pays himself a monthly salary and keeps a record of this for six months. The salary deposits would need to reflect in the applicant’s bank account and if he has not done this in the past, he should delay his application by half a year and start doing it as soon as possible.

“It is not good enough to simply show that the CC or company is profitable. The bank will want to know exactly how much of the profit goes to the bond applicant.”

Sometimes, Van Alphen says, an applicant will go straight to the bank with his application, which will be accepted by the first rung staff, quite possibly with minimum documentation attached. Subsequently, the applicant may find that the credit investigators at a higher level at the bank want additional information and then are quite likely to reject the request.

He says hopes are then dashed and the applicant goes away disappointed.

He says one reason for this is that the applicant may be dealing with an expert banking consultant able to advise on a wide range of banking investment subjects, but possibly not completely familiar with the bank’s bond award criteria. By way of contrast, he says bond originators are focused on this one field and are experts in it.

Van Alphen says whatever route the applicant takes he should not be discouraged if at first his application is rejected.

He says this is often the result of the application being incorrectly put together and this does happen when the person assisting the client, whether at the bank or elsewhere, is not yet an expert in this subject.

Source: Property24

Home loan application

Sorry, comments are closed for this post.