Qualifying for a home loan to become tougher

Prospective homebuyers are being urged to getting moving with their purchase plans, as qualifying for a home loan is expected to get even harder in the next six to 12 months

First-time homebuyers are poised to become one of the biggest casualties of the country’s recent credit downgrades, as banks and other financial institutions are likely to apply even stricter qualification criteria for bonds.

“Now would be a great time for those who have spent the past few years paying off debts, accumulating savings and building up a good credit record to make their move and become homeowners, even if they buy a less expensive property to give themselves room to cope with possible interest rate increases in the future,” BetterLife Home Loans CEO Shaun Rademeyer advises.

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“We anticipate that it’s going to become significantly harder to obtain such loans after the end of this year. The banks will naturally become increasingly cautious about extending any kind of credit as the effects of the ratings downgrade become more evident. In fact they’re already starting to apply stricter loan qualification criteria. Consequently, we believe there’s about a six-month window of optimum buying opportunity now, especially for first-time buyers.”

You can improve the chances of your home loan application being approved by putting down a bigger deposit.

If your bond application has been approved, don’t make the mistake of taking on additional debt, because banks continuously monitor their clients’ credit profiles and perform regularly updated affordability checks until your bond registration process has been finalised.

These checks, says FNB Home Loans head of credit Tommy Nel, could alter the status of your home loan if you take on more debt while the process is ongoing. If you’ve taken on too much additional debt, you could find your loan either being reduced, repriced or – worst case scenario – the bank could decide to cancel your bond altogether.

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“Consumers are often unaware that taking out more debt after their home loan has been approved will trigger a review on the loan application. We continually reassess loans that we’ve approved in the window period up until the bond registers in the Deeds Office and the property is transferred into the new owner’s name,” Nel says.

It’s also important to ensure that you keep up to date with any other credit or loan repayment obligations that you may have during the home loan finalisation period, because defaulting during this period could negatively affect your home loan.