7 Nov 2017
There are some common misconceptions about buying a house that could be quite off-putting for the first time home buyer. Many of these relate to home finance and what’s needed for a successful home loan application. The article below unpacks some of the top home-buying myths you’ll encounter on your journey towards becoming a bona fide home owner.
False. While banks are the traditional ‘go-to’ for home finance, SA Home Loans is an independent, specialist mortgage provider that’s been operating in South Africa since 1999. We offer flexible lending solutions, at competitive interest rates, and have helped over 100 000 South Africans with their residential loans.
False. The biggest reason for a bond application being denied is an applicant’s low credit score. Credit providers use this score to ascertain an applicant’s credit worthiness. Credit worthiness has to do with your history of credit and debt repayment and how much of a financial risk your prospective credit provider will regard you to be.
The best way to increase your chances of having your bond application approved the first time is to access your own credit report before you apply for any additional credit. Check this report for errors, report any you do find, and start working on improving your score. You can draw your credit report from any of the following credit bureaus: TransUnion, Experian, XDS and Compuscan.
According to TransUnion, a very poor credit score will be 486 and below and doesn’t bode well for having a bond application accepted. A good score is between 680 – 766, and an excellent score sits in the 767+ bracket. You’ll want to move your credit score up to beyond the 640 mark if you want to increase your chances of qualifying for a home loan.
False. According to the National Credit Act (NCA), you are entitled to one free credit report every 12 months. Thereafter, you’ll be charged a minimal fee for drawing a report. This is worth paying, as you’ll be able to track any improvements to your score and assess your own readiness to apply for a new home loan.
False: Accessing your own credit report is known as a ‘soft enquiry’ and doesn’t impact on your credit score. ‘Hard’ enquiries, on the other hand, are done by credit providers, usually with your permission, and can lower your score by a few points. This is one reason why you’ll want to have all your financial ducks in a row before applying for any additional credit – so a prospective financial lender will only have to check your credit score once, which will limit the impact on your score.
False. While it’s always a good idea to shop around for competitive interest rates, you also want to find a home loan provider who’ll provide you with consistently excellent service.
Why? Because you’ll be in a relationship with this lender for a very long time and will want to know they are concerned about customer service and can be easily contacted should any problems arise.
Also be sure to ask about any requirements and fees you’ll be charged beyond your principal and interest payments – you don’t want to be caught out by any hidden costs listed in the fine print.
That’s hopefully cleared up some of the more common misconceptions about buying a house for you. Feel free to contact SA Home Loans at any stage for more tips on applying for a home loan.