Recession Survival Tips

By Tom Martens

A recession brings on economic uncertainty.  Consumers aren’t willing to spend money, and banks aren’t always willing to lend it.  However, believe it or not, a recession is a good time to save money on a home loan, as long as you are prepared.

A recession is a good time to buy a home because interest rates tend to be lower, which will save the buyer thousands of dollars.  Nevertheless, that doesn’t mean you should go into the home loan process unprepared.  First of all, pull your credit report.

You need a high credit score to qualify for good home loan rates during a recession.  Check your report for errors, and if you find them, get them corrected.  If you have high balances on your credit cards, pay those off.  If you have late payments, establish an on time payment history of at least six months. A year is even better.

A strong credit score will not do without money in the bank.  Make sure you have least 20% of the property’s total value in the bank.  Also, allow money in the bank for two to three months payments of the loan.  These steps are required by the lender.

Also, you must verify employment, income, and assets.  You cannot just tell the bank you have enough money.  Provide the bank with documentation including paycheck stubs and bank account statements.

The documentation is even more important if you are applying for a home loan during a recession because the lender needs proof you can afford the home loan and will make the monthly payments.  Collect the necessary documentation early and have it on hand prior to applying for the home loan.

Don’t be afraid to negotiate with your home loan provider during a recession.  Home loan providers need business, but especially during a recession when home purchases may have slowed down.  Shop around and see who offers the best deal with the best rates. Let your home loan provider know you’re
talking to the competition and see if they can offer you a better deal.

Buying a home can be time consuming and intimidating, and buying a home in a recession can be downright frightening.  But with some preparation on your part, you should be able to qualify for a home loan with competitive rates.  See your home loan provider for answers to your specific questions.
They can take the time to examine your situation and come up with a home loan that best suits your needs, recession or not.

Tom Martens is the content coordinator for South Africa’s leading home loans portal which amongst others offers bond origination services for all major banks.