It is of utmost importance to tell the absolute truth about your financial status when applying for a home loan. Even if you don’t qualify for the full bond, you can then always try to make a deal with the seller to settle the outstanding amount. In this article I will explain why it is very important, especially if you are a first time home buyer, to be very open and transparent about your financial status towards a mortgage broker.
If you choose to make a deal with the seller, then the worst that can happen is that the banks can reduce the loan, or in extreme cases they can cancel the bond because they can see that you are busy going beyond your affordability limits.
Another important factor to bare in mind is, if you make a deal with the seller then it might be classified as fraud, and not everybody is aware of this. So make sure to inform your banks if you are busy with a deal as such. This is very popular in the lower end of the market, where people expect to get a 100% loan on the bond but fails.
People are now fully aware of the terms and conditions of the NCA (National Credit Act) but still don’t know that people should inform the banks of any major changes in the applicant’s financial status between the time period of applying for the bond and the registration of the bond. You are obliged to inform the banks if you are unemployed or if you are sitting with a big financial let down. It is important to inform the banks, so that they can re-evaluate your bond to see if they can lower the premiums or to see if you are still capable of paying the bond.
The NCA states that all lenders should do a good investigation on all loan applicants, to make sure that the applicant can afford the bond. This is also to provide the applicant and the seller with some form of security. The NCA is very strict on reckless lending by credit providers.
We have seen that some sellers have to sometimes put their properties up for sale for the fourth time before a qualified home buyer is found. This causing concern for sellers and that is why sellers should work with real estate agents to make sure that they get a qualified home buyer for their property.
People should understand that there is a difference between pre-approved and pre-qualified people, even with the help of a mortgage originator. Pre-qualification is where a lender gives the applicant an estimate of what they can afford. And this is calculated with just a little bit of personal info. They don’t even pull a credit report to give you a pre-qualification. The reason for this is that buyers can get an idea of in what price range they should be looking at.
Where as to get pre-approval, you need to provide the lenders with detailed documentation that includes bank statements, tax return slips and salary slip, just to mention a few.
We can thus see that it is very important to provide the lenders and the banks with the correct information. So that they can make sure that you don’t make a mistake by signing with something of these amounts of money, and to make sure that you can afford to buy the property and get the much needed home loan.
When you are ready to proceed with a home loan application , No Agent offers a mortgage origination service and shops around for the best interest rate from all the major banks in South Africa.