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First time Buyers and Home Loan Applications

South Africa’s biggest bond originator, ooba say that 2013 is expected to show reasonable growth in the property market, and First Time Buyers should try to bring a healthy deposit to the table.

First-time home buyers averaged at 52.7% of bond. The average nominal house price recorded by the oobarometer in the 12 months to December 2012 grew 3.9% year on year, from R830 641 in 2011 to an average of R862 940 in 2012. The economy continues to operate under heavy pressure, and Household Debt remains at high levels. Lenders credit policies remain strict and they continue to focus on loans below 90% loan-to-value.

In the last quarter of 2012, ooba reported acceleration in Buy-to-Let applications, this could be motivated by the increasing rental yields as recorded by Tenant Profile Network (TPN) Credit Bureau. ooba reported a record home loan growth in 2012, reaching a new high in November, up by 313% over January 2009 being the lowest month in the course of the property market crash.

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Minimum income to qualify for a Home Loan

Several South African banks confirm that there is no minimum income to qualify for a bond. Banks use your income to determine the size of the bond that you do qualify for. The general rule is that banks will offer you a bond equivalent to the repayment of (33%) of your monthly income towards monthly installments. The installments will be calculated based of the interest rate you have been offered by the bank. This is based on the “repo rate” or prime interest rate, which is set by the SA Reserve Bank. The prime rate is 8.5 as at 2013/07/04, your interest might be 10% as the banks will probably charge you a slightly higher rate. As an example, if you purchase a R600 000 property, you’d pay about R6 000 a month, so you would need to earn about R18 000 a month.

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How does your Credit Rating affect your Home Loan Application

Every South African citizen has a credit record whether good or bad, all your credit transactions are documented and you are given a rating. Your bank will need your permission to access these records and since you cannot get a home loan without them scouring your credit worthiness, you may as well give it to them and get it over and done with. However you can also obtain these details yourself before submitting them to your bank so that you know what upfront what your chances are. You are entitled to a free copy of your credit record once a year. You can go to www.transunion.co.za for more information or to obtain your credit report. Your credit history can be a good thing as banks also decide which interest rate to give you based on your credit score and if it is good they will consider you a positive risk and you are more likely to get better offers from different institutions.

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First Timers

As a first timer you are afforded privileges, and the basic criteria to qualify is the following:

• Its needs to be the first time you’re applying for a home loan

• You must be at least 18 years or older

• You must be permanently employed for longer than 6 months/self-employed for 2 years

Some of the institutions will offer first timers a bond above 100% to cover some of the Transfer and Legal Costs. Most banks now offer a 30 year bond repayment period, making the monthly costs more affordable, created specifically for first-time buyers. However sometimes banks will make you take out a bond protection insurance policy (covering your outstanding bond if you die), which will act as security for the loan. Make sure that you state clearly on your application that you are a first time buyer applying for a loan for the first time.

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Consult the Professionals

Find someone knowledgeable to assist you through this process, it could be your Estate Agent or your bond originator or both. The more professional advice/help you can get the better. Always ensure that the Estate Agent of your choice is fully qualified and has an up to date EEAB certificate, Rogue Estate Agents can hurt you more than help you.