How to help your buyers understand home financing

Explain financing

Most prospective homebuyers are either too optimistic or too pessimistic about their chances of being granted a loan – and the reason is usually not a lack of realism about their own financial affairs, but a lack of knowledge about the banks’ current credit criteria, and about the bond application process itself.

Fortunately, though, this situation can easily be remedied if estate agents encourage buyers to seek advice from a reputable mortgage originator before they either give up on homeownership, or make an offer on a property they don’t actually qualify to buy.

False optimism, for example, might stem from a homebuyer’s belief that he or she will be able to secure a 90% or even 100% home loan – that is, that only a low deposit will be required because he or she has other assets to secure the loan.

However, this is not how banks work these days: they only look at the potential borrower’s credit history, and the disposable income left every month after living expenses have been paid and other debt obligations met. Consequently, even those with substantial assets may find that they qualify for a considerably smaller loan than they thought, or will have to save a bigger deposit, in order to bring the monthly bond repayment down to within the limits of their assessed affordability, and a good originator can provide guidance along these lines.

On the other hand, those who would like to buy a new home may be overly pessimistic about their chances of being granted a home loan because of previous credit problems, or because they believe they don’t have a big enough deposit.

And here again, a good mortgage originator will be able to provide advice with regards to any debt repair that may be necessary before potential borrowers can apply for a home loan, what type of property they could qualify to buy with the deposit they have in hand, and even whether they are eligible for any of the special home loan programmes that some banks offer first-time buyers.

Meanwhile, homebuyers also need to understand that the loan criteria of the various banks are often quite different from one another, and can also change quite frequently, as can their deposit requirements, and the interest rates they charge on home loans.

It would be extremely difficult, if not impossible, for individual consumers to keep up with all these changes, but that is exactly what mortgage originators do, and they are therefore in a position to provide a comparison of the various borrowing options on offer from at any particular time – and of course to motivate your buyer’s application to the most suitable lenders.

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About BetterLife Home Loans

Since 2003 BetterLife Home Loans has been SA’s No.1 Bond Originator, handling the entire home loan application process on your behalf – free of charge! Our aim is still to source the best interest rate for you by submitting your home loan application to all the major banks. There is no easier way to apply for a Bond or Home Loan in South Africa!

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