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Getting on the property ladder can be a daunting experience. Whether it’s for investment purposes or you’re buying your first home, there are dozens of essential considerations to take into account before you know if you’re ready. However, these are definitely worth going through, because the rewards for getting on the property ladder are far greater than the effort!
Guidelines for first time home buyers
What benefits would a first-time buyer have, when applying for a home loan?
ABSA and Nedbank does not offer cost inclusive loans and expect clients to pay their own costs, no matter the size of the loan
Banks such as FNB and Standard Bank are the two options to possibly include transfer and bond registration costs to the loan, ONLY when the following applies:
- When the purchase price does not exceed R650 000.00 and the client’s income does not exceed R25 000.00 gross earnings, FNB may consider including 4% of the purchase price towards costs
- When the purchase price and attorney costs (added up) does not exceed R1 000 000.00, Standard Bank will consider adding 4% of the purchase price towards costs, on condition that the clients credit score allows for this and the client has not owned property before.
- The final decision always remains with the bank and they will apply their own credit scoring models, as well as information drawn from the various credit bureaus such as Transunion and Experian to determine the risk profile of the client
It is however recommendable to pay your own costs, as the banks generally increase the interest rate, when they include the costs.
There is a myth that first time buyers will secure a 100% bond easier than a client buying for a second or third time. First time buyers used to have special benefits such as 108% bonds, but the current situation is that the banks decision is strictly guided by the internal scoring models within the various banks and the clients external credit bureau track record.
The banks system will generate a risk rating for every application on submission and if the clients risk rating is not sufficient, the system will block the application and result in the application being declined upfront, without any supporting documentation, motivations or explanations pulling through to the banks credit department.
It is therefore very important to ensure that your general credit score is at the best possible level, before applying for a homeloan.
As long as there are any judgements or defaults on the client’s name, the banks will not be able to assist, and it is important that the clients credit profile is first updated to “paid up” status and the judgement/default removed before applying to the banks.
It is also very important for buyers to understand that your general account handling with your own bank, plays an important role in the credit assessment and if there are any returned debit orders or unauthorized overdrafts on the client’s profile during the previous 1 – 2 years, it will have a negative impact on the outcome of the application. This will affect the client’s chances for a 100% bond and possibly result in a lower offer or decline.
The banks use the clients general credit behavior as an indication of the quality client they are assessing. When a client shows commitment to ensure that his R200.00 Truworths, Credit Card etc account is paid on or before the due date every month, the risk becomes lower for the bank, as the client is more likely to also make his bond payment on time.
With regard to securing 100% bonds, the clients own bank is generally more likely to consider a 100% bond, if the clients scoring allows it. The various banks have different cut off purchase prices, for considering 100% homeloans.
In summary the following applies:
If one of the applicants bank with Standard Bank, Standard Bank would be a strong possibility for a 100% bond. We do however also secure 100% bonds for non SBSA clients.
If one of the applicants have a banking relationship with Nedbank (either cheque account, MFC car finance or current homeloan), Nedbank will be a strong possibility for a 100%
FNB can offer 100% homeloans irrespective where the clients bank.
ABSA considers the applicant with the highest income as the main applicant. When the main applicant banks with ABSA a 100% bond is a strong possibility. In exceptional cases, ABSA can also consider 100% bonds for non ABSA clients.