Home Loans | Home Loan Advice

Home Loans

Wise individuals will always attempt to get the best value for their money, and one way of doing so is to apply for home loans rather than renting from someone else.

In South Africa individuals can make use of estate agents or use an online loans service to look for their desired home. The internet has transformed the way everyone does business and individuals can make use of online home loan or bond calculators to determine the home loan value they can qualify for. Off course other factors such as the credit rating of individuals will also influence the amount and interest rate charged when the actual home loans application is submitted.

Individuals are always advised to look beyond the dream home and should look at other factors such as the area in which the property located. Factors such as the market value of surrounding properties will give individuals an idea of how easily they will be able to sell their property in future if they wish to do so.

Individuals normally have three options when wanting to apply for any home loans, and can either directly make appointment at the bank, make use of an estate agent or make use of bond originators. Estate agents receive commission from the seller when a sale has been made whilst bond originators receive a fee from the bank directly.

Bond originators works with major banks on a full time basis and very often there are greater advantages in making use of bond originators then taking the process into your own hands. Such advantages include better home loan rates as bond originators submit thousand of home loan applications annually and therefore have better negotiating power.

Other than lower rates, bond originators take the hassle out of a home loan application and will handle the whole application process from beginning to end. They will handle all the paper work and individuals will never have to speak to any bank directly. Their service includes a detailed explanation of the home loan application process so individuals will never be left in the dark.

Using a bond originator comes at absolutely at no charge to the individual and originators will also obtain various quotes from various home loan financial institutions to ensure that the best value for money is given.

There are five important tips that individuals should consider when considering home loans:

Ensure healthy credit rating by making regular monthly payments on time to all creditors.

Reduce monthly expenses and by increase your monthly disposable income with as little as R1300 per month, could increase your home loan with R100 000.

Make use of bond originators who will be able to obtain quotes from various home loan institutions at the best interest rates.

Obtain a pre-approved home loan. A bank can provide a certificate of the home loan value they are willing to give you which could speed up the purchasing process of your desired home, and will give you an advantage over other possible buyers who show interest in the same property.

Be realistic. Even if the bank offers you a high home loan value it doesn’t mean you have to use the full amount to purchase a property. Additional costs such as rates, taxes, levies and insurance will also be added to your monthly home loan installment.

Individuals seeking more information on home loans in South Africa can enquire at all major financial institutes

Home Loans For First Time Buyers

As it obviously implies, home loans for first time buyers are loans that help you realize your dream of buying your first home. This type of loans is in abundance these days because the special financing for people buying a home for the first time usually encourages growth in communities.

There are various programs that offer help in this area like the federal housing program, programs funded at the state level as well as programs by private foundations. Prior to taking out one of these however, it is necessary to do some research and know more about them.

Back in 1934, the Federal Housing Administration (FHA) was founded to provide insurance to lending institutions to encourage them to offer home loans to individuals looking to purchase a home for the first time. When the authority was later transferred to the Department of Housing and Urban Development (HUD), these efforts broadened. Today, the FHA is the foremost provider of home loans for first time buyers.

This type of loan has a lot of advantages:

It empowers younger adults who are starting out early and gives them a better chance of owning a home.
Adults who have a limited income are also given the opportunity to own a home.
Down payments are reduced.
Closing costs are financed so buyers need not pay them upfront.
It keeps the economy healthy.

Aside from the FHA, there are still other options for first time home buyer loans. There are a lot of states that have initiatives that can act as a supplement to FHA loans. There are also private charities that offer special loan options to new home buyers as long as they meet specific requirements. There are plenty of programs offering home loans for first time buyers out there that you can look into and take advantage of.

When taking out a first time buyer home loan, your first installment will more or less be the same as a rental payment on a lease contract. The only difference is that you will have to pay transfer duties to the tax receiver of revenue for buying the property and having it in your name. This is sometimes included in your bond though.

When applying for a first time home loan, there are requirements and several special criteria which you’ll need to fulfill to get approved. If you have a good credit record, you will usually qualify for 25% – 30% of your annual income. You may qualify for a bigger amount if you apply jointly for a home loan.

Generally, when applying for home loans for first time buyers, you are required to provide basic details of your monthly salary, the offer to purchase you signed for the property and your credit history.

To qualify for a home loan for first time buyers, you must pass the following criteria:

You must be 21 years of age at least.
You must have a good credit record: no defaults or judgments.
You must be employed permanently for six (6) months or self-employed for two (2) years.
You must have a minimum salary of R10,000 to R15,000 a month (single or joint income).

South African banks usually approve around R100,000 to R150,000 minimum. To work out how much you qualify for and to find out the interest rate that you will have on your bond, banks do a Loan to Value Ratio (LTV). This is a lending risk assessment ratio which lenders and other financial institutions examine before approving a mortgage. High LTV ratios generally mean a higher risk so if the mortgage is accepted, the borrower who is considered high-risk is usually required to buy mortgage insurance or pay higher interest.