Article summary:
- Bond applicants do not get preferential treatment by going direct, as banks are governed by the National Credit Act and lending is regulated.
- Statistics show that you have a far better chance of obtaining the thumbs up on your home loan application if you go through a bond originator.
- Home Loan Consultants are successful in securing home loan financing for one in every three applications that are initially turned down by a bank.
When the time comes to apply for a home loan, you’d think that your first stop should be your local bank branch for a cosy chat with the manager. After all, you’ve been a loyal customer for years.
In reality, the notion that you will get preferential treatment by going direct is a myth, as banks are governed by the National Credit Act and lending is regulated. But there is a bright light at the end of the tunnel for prospective homeowners. Statistics show that you have a far better chance of obtaining the thumbs up on your home loan application if you go through a bond originator.
Home Loan Consultants like O-YES are successful for one in every three applications that are initially turned down by a bank.
Aside from the proven success rate of bond originators and consultants, there are other good reasons for not shopping around yourself. Perhaps the most convincing of these is the time you save by removing the tiresome legwork involved in knocking on countless bank managers’ doors – time during which the home you have your heart set on could be snatched away from under your nose by another more astute buyer.
O-YES can submit your application to up to eight banks including your own, thereby mitigating your risk of not getting your home loan, and hence your dream home.
This is a pretty persuasive argument for not putting all your eggs in one basket with your bank manager.
Ways to get the upper hand
She points out, however, that there are certain things you can do to boost your chances of approval. A good credit score with a track record of responsibly repaying existing contractual debt is essential to earning favour with the banks. Your credit record needs to indicate to the bank that you manage your debt responsibly. So, if you pay your minimum instalments timeously every month, the bank will see you in a far more favourable light when it comes to providing you with the financing you need.
Being able to afford the monthly bond instalment is another critical requirement. Banks will require proof of income together with an income and expenditure statement that indicates that, once all contractual debt commitments and household expenses have been accounted for, there is still sufficient net surplus income to pay off your home loan, which is where the legwork comes into play.
Each bank will provide you with its own set of forms on which to provide the aforementioned information. A time-consuming exercise indeed. Using a bond consultant to submit your application to multiple banks requires you to complete only one set of forms. A win-win situation if we’ve ever heard of one.
Also important is that the property purchased be in good standing and situated in a suburb where property prices show steady growth.
How to handle being declined by your bank
A homebuyer whose application for home loan finance has been declined by a bank due to a poor credit score should obtain a copy of his or her credit report from a credit bureau. Should the homebuyer identify errors on the credit report, the credit bureau should be notified of these and the homebuyer should take the necessary action to rectify the information displayed on the report. This will entail engaging with the credit provider who has provided the credit bureau with incorrect data.
We would warn against continuing to apply for credit, apart from home finance, after your home loan application has been declined due a negative credit score (in other words, because your credit report shows that you have not been managing the repayment of your existing debt responsibly) as this could worsen your credit score. Every credit application that you make requires the credit provider to check your credit report, and this is then indicated on your credit record. If you apply for credit when you have a good credit score, multiple credit applications will seldom negatively impact your credit score. However, if your credit score is poor, multiple credit applications can negatively impact this even more.
Apart from using the services of a bond consultant, first obtain your credit report directly from a credit bureau to check that your debt repayment history and overall credit score is satisfactory.
Then contact O-YES to get pre-qualified so that you can see what amount you can afford, and we can advise and help on getting and securing your dream property.
Armed with the knowledge that your credit score is sound and that you can afford the monthly bond repayment instalments, and with a bond consultant guiding you through the process every step of the way, the chances are very good that you’ll be awarded your home loan without any difficulty at all.
