Bond pre-approval is far more than an optional extra

There are few experiences quite as exciting as acquiring a place to call your very own, but buying a home is also a lengthy, convoluted process involving multiple steps with potential pitfalls that can put a damper on the experience or even scupper your goal completely if you don’t have your ducks in a row.

And, according to Herculene Visser, Area Specialist for Lew Geffen Sotheby’s International Realty in Tokai, one of the most critical is to get a head start on the financial application before even beginning the search for your dream home.

“Pre-qualification not only affords prospective homebuyers the peace of mind that their credit record is in good standing and that they are considered a viable credit risk, it also arms the them with the knowledge of how much they can afford to spend and the type of bond deal they can expect from a bank.”

She adds that obtaining pre-approval also gets the application process started, which means that the transaction can be more swiftly concluded once buyers have found the home they want.

However, despite this being a free service offered by bond originators, Visser says that often buyers are reluctant to acquire pre-approval and this can often be an unnecessary stumbling block in the purchase process.

“We sometimes see an incredible amount of time wasted due to the absence of pre-qualification and, on occasion, it has been the reason that purchasers have lost their dream homes so it really doesn’t make sense for buyers to refuse a service that can easily eliminate these stumbling blocks.

“The main reason appears to be that buyers are of the belief that if they merely contact their bank they will be told whether or not they qualify for a bond and, if so, for what amount but this isn’t true as it’s not that speedy or simple to establish such facts accurately.”

Claude McKirby, Southern Suburbs Co-Principal for Lew Geffen Sotheby’s International Realty, says: “Whether or not one uses a bond originator its essential to shop around. Don’t assume your bank will give you the best rate because you have banked with them for many years. All banks shuffle their investment portfolios from time to time and yours may not be focusing on mortgages at the time.

“It can be very time-consuming shopping around however, which is why we work closely with ooba, South Africa’s largest bond originator, as they not only offer the invaluable pre-qualification service, their access to multiple lenders enables them to negotiate on your behalf and to obtain the best deal.”

He explains the criteria for a successful bond application: “The most critical requirements are a good credit record, a track record of repaying contractual debt responsibly and being able to afford the monthly bond instalment.

“Banks will therefore require proof of income as well as an income and expenditure statement to show that there is sufficient net surplus income to service the bond once all existing debt commitments and household expenses have been met.

“As banks are legislated by the National Credit Act to only advance credit to consumers who have a good credit record and have proven ability to repay debt responsibly, a bad credit record is literally a deal-breaker.”

He adds that banks also generally disqualify applicants who have previously been declared insolvent and it is only in exceptional cases will they consider approving finance for a rehabilitated insolvent.

Another factor which can count against an applicant is a home buyer who has high credit facilities available on credit cards, retail accounts and access bonds but does not utilise them. Although one would expect this to count in the applicants favour, the opposite is, in fact true.

Visser concludes: “Consulting knowledgeable and experienced property finance specialists and estate agents is essential to successfully and seamlessly navigate the potential administrative minefield that acquiring your dream home entails.”