Qualifying for a home loan in tough times

Property is always a great investment, with almost certain returns. However, in tough economic times banks become nervous about lending, which can make owning your own home seem like a pipe dream. A recent poll conducted by Gumtree Property showed that 66,6% of people believe that it’s always better to own your own home, while 26,6% said they couldn’t afford to buy or rent and have to share with others. There are however, ways and means to secure a bond, says Barrie Swart, Head of Gumtree Property.

  • Apply at the right time

The property market moves in cycles. If you have cash on hand, the best time to invest is after the bubble bursts and prices drop. But if you are applying for credit, it’s best to buy as a property boom starts. “The downside of a boom is that house prices are skyrocketing, but if you buy at the very cusp of a property boom, banks are more likely to extend credit. Large construction prices, media optimism and good interest rates are all signs of a boom.”

  • Improve your financial standing

If possible, reduce your existing debt – start paying an extra amount into your outstanding accounts every month. “The more disposable income you can free up, the better,” says Swart. “And the more money you have put away in a savings account, the better. Aim to have at least 10% of the value of your intended property put away in cash.”

  • If you are rejected, find out why

If your application is turned down, find out why. “Bonds are rejected all the time – perhaps you don’t have an adequate credit score or bad debt. Once you know, you can address the issue and reapply.”

  • Shop Around

“Different financial service providers have different criteria for assessing your credit-worthiness. Explore as many channels as you can – including your bank and bond originators – to find out who can extend the most credit to you, at the best rate.”

  • Buy to Improve

“Your dream home might not be financially accessible at this stage. Try to buy the worst house on the best street and make improvements over time. You might not have your dream kitchen and pool right away, but you can add those features as your financial standing improves, and then flip the home for profit.”

Mortgages can be extremely expensive and difficult to obtain, but a little groundwork goes a long way. Don’t give up on the dream of owning too quickly – keep working on it and you too can become a home owner, no matter the state of the economy.

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