The mortgage originator
Before you even begin looking for a house, let alone applying for a loan, it is a good idea to seek out a mortgage originator.
The mortgage originator
Before you even begin looking for a house, let alone applying for a loan, it is a good idea to seek out a mortgage originator.
“A what?” you might be saying.
Saying mortgage is the fancy way to say home loan, and these companies and individuals are called originators because they are the starting point (or origin) of approximately 50% of all home loans in South Africa. Originators work independently but collaborate with the banks to facilitate the securing of home loans. The banks use them because it outsources the majority of the expense of drumming up and processing business.
But why should you use them?
Most important their services are free. Yes, free. The originator is paid a commission by the banks for successfully processed home loans. So even before you start looking for a property, ask around for a reputable mortgage originator and they will be able to give you a lot of advice, and may even be able to “pre-qualify” you. Which means that they will, with your permission, look at your finances and give you an idea of what size loan you can qualify for. This in turn lets you know what your price-range is.
Sellers and agents alike prefer to take offers from purchasers who have been pre-qualified by a reputable and experienced mortgage consultant, as this means the loan process will likely be smooth and quick, which in turn means that the sale will be smooth and quick. This puts pre-qualified clients in a stronger negotiating position when lodging an Offer to Purchase on a property.
It is important to note, however, that this pre-qualification is only an indication and not a guarantee of the final loan amount. But originators who care about their reputation would try their very best to be accurate in this assessment.
Now that you have been pre-qualified and you have made an offer on a property, you might find yourself being pressured by the estate agent into working with a particular originator.
But you can choose your originator. The reason for this pressure can be benevolent: often the estate agent will suggest originators they know and trust.
There are many instances in which the estate agent is receiving a commission or ‘referral fee’ for sending your business to those particular companies. This is a referral fee that you yourself might be able to receive if you negotiate with your originator.
Once the Offer to Purchase is signed it is time to begin the application process: a good mortgage originator will ensure that the home-loan application process is as painless as possible for the client and that the application will succeed. Originators are able to approach GBS Mutual Bank and other major South African banks simultaneously, which means that the client only has to provide documents once, while still keeping their options open.
This shopping around is important as different banks may offer different interest rates in order to compete for the home loan business. A favourable interest rate can amount to hundreds of thousands of rands being saved over the term of the loan. Using an originator thus enables the client to make an informed decision when choosing where to place their bond.
As with the banks it is important to remember that mortgage origination is a business. People will give positive pre-qualifications or outright lie in an attempt to secure business. But many smaller origination firms rely on their reputation for accuracy and honesty and most importantly on client satisfaction. This ensures repeat business and referrals of new clients.
