Dollar House

According to statistics released by bond originator ooba, home prices have fallen 6.6 percent overall compared to October last year. In real terms, that means the averaged home priced at R803,908 last October would only be able to sell for R751,118 in October of this year.The evidence is showing in a couple of ways, and South Africa is not immune to the current global credit crisis.

The second indication of the poor property market is that potential homeowners are finding it increasingly difficult to get financing for their properties. Banks are being cautious in light of the credit crisis, the National Credit Act and deteriorating economic outlook. Though the rate of home loan declines were down slightly, 1.4 percent, it doesn’t really dent last month’s rate of 51 percent.

In the third quarter of this year alone, the number of loans more than two months behind rose 21.5%.Another reason for banks to tighten their lending is the rising number of homeowners who are late on their installments.

What is a potential homeowner to do in this market? It is important to note that decline rates vary from one bank to another, so take the time to try applying with other banks before you give up completely.

Another must, a sound credit rating. It is no longer enough to have a steady paycheck. Home loan applicants must be able to prove that you can make your installment payments and that you have not been late or defaulted on any other payments for at least two years before making your home loan application.

Lenders are looking for stability in their borrowers, as evidenced through a good record of paying of credit card debt. A history that shows you have already successfully managed a home loan will also go a long way with lenders.

Be honest about your credit history. It is best to let lenders know the truth about everything, even the rough spots you may have had. This allows them to work with you and see that you are truely serious about your obligations. Opening a savings account for your home deposit fund will also show how serious you are but usually require a 10% deposit, but that also varies bank to bank.

Make sure your monthly installment is no more than 30 percent of your monthly income. Less is preferable. Banks will not consider your application if the installment does not meet this requirement.

On the one hand, sellers are having a difficult time finding buyers and are being forced to accept lower offers, which is great news for buyers. On the other hand, potential buyers are struggling to secure financing. All in all, today’s property market is fraught with frustration.

As a potential buyer, it is really worth your while to explore every avenue to get a home loan as long as you can afford the payments and your job is stable enough to allow the commitment.