Credit history critical for home buyers
Johannesburg - According to property financing company ooba,
latest statistics from the Credit Bureau Monitor's 2010 fourth-quarter report
show that only 53.3% of SA's credit active consumers are classified as "in
This is alarming, given that banks are adopting a
conservative approach to lending and are scrutinising credit history as a
preliminary step before even considering any bond applications.
The result is that credit rating is playing a more critical
role in influencing the bond decline rate, said Carol Reynolds, Pam Golding
Properties' area principal in Durban North and La Lucia.
"Essentially, the two key factors that will impact on a
bond application are affordability and credit record. If an applicant does not
have a clear record, this will adversely impact his/her chances of obtaining
finance. It is therefore prudent for purchasers to clean up their credit
profile before embarking upon house-hunting," she said.
Reynolds adds that the best way of upholding a favourable
credit rating is to ensure all accounts have been paid timeously, and that any
judgments have been rescinded.
A blacklisting can remain on a credit profile for two years,
so the sooner accounts have been settled the better. It is also important to
follow up with the relevant credit providers to check that records have been
"Against this backdrop of conservative lending and
deterioration in consumer credit records, it is not surprising that the
residential property market has been slow to show any marked signs of recovery.
Three tools for buyers and sellers
"Indeed, while there have been sporadic bouts of
activity, prices generally have remained flat, while the bond acceptance rate
has only marginally improved.
"On the whole, we are noticing more activity in the
affordable price brackets. However, this activity is being negatively impacted
by poor credit profiles. Essentially, buyers may often be willing, but not
necessarily able to obtain the requisite finance to pursue any
transactions," said Reynolds.
As a result she recommends that prospective purchasers try
to ensure they are deemed "A-grade" purchasers by virtue of the
following three imperatives: a clear credit record; the ability to buy without
having to sell first; and finally, a pre-qualification from a bank or mortgage
"If buyers arm themselves with these three tools, they
will be able to negotiate better prices on potential properties because sellers
will be satisfied that they mean business."
The three sales drivers from a seller's perspective are
price, calibre of purchaser and "cleanliness" of the terms of the
offer. Pre-qualified buyers becomes highly sought-after, and if the purchaser
is then able to offer clean and simple terms, price becomes more negotiable.
It is a simple case of both banks and sellers assessing the
risk in the potential deal - the less risky the transaction, the greater the
chance of it being accepted by the seller and financed by the bank.
Said Reynolds: "On a positive note, there is a sense
that the latter half of 2011 may see renewed activity in the marketplace, but
this must be viewed within the context of the lending climate.
"Strict lending continues to keep a lid on price
inflation, and while the number of units sold may start increasing, it is
unlikely that prices will follow suit."
There are still many trying to apply for home loans that are "just one month behind on..." This is unacceptable to banks, because, remember they do not reason on emotion, just on facts.
If you can't pay your clothing account, how can you expect the banks to believe you're going to pay your bond installment which is 10 times more than the clothing account?