What you need to know about the home loans approval tips
A home loan can provide a convenient way of buying property. Instead of having to pay the full amount (which generally costs significantly more than what many people can afford) individuals can pay a financial institution off over a set period of time, with added interest.
While banking institutions continue to remain the most popular choice for home loan applications, there are numerous other lenders offering quality home loan solutions.
Home loans approval tips and process:
Many people find the home loans approval process quite intimidating, even though it has become a lot more transparent in recent years.
Since the housing crisis of 2008, lenders across the world have introduced stringent criteria for home loans approval processes.
Before applying, you need to start by establishing whether you are ready for such a financial commitment. If you earn a regular monthly salary you stand a good chance of qualifying. It doesn’t end there though.
Know what you can comfortably afford and don’t extend yourself to the limit. Qualifying for a home loan means that you should be able to comfortably afford to pay your bond without too much strain on your monthly budget, even with interest rate hikes.
In order to qualify, your bond repayments, taxes and property insurance should not be more than 25% to 30% of your gross income.
There are additional costs and fees to consider. This typically includes a deposit, moving costs, homeowners’ insurance as well as rates on your property.
A deposit isn’t a requirement these days. Banks however, generally want a deposit of between 10% and 30% of the purchase price.
Documents required for the process generally:
- A valid copy of your ID
- Proof of income
- A copy of the offer to purchase containing the seller’s and purchaser’s details
- Salary slip not older than 2 months or a letter from your employer with a breakdown of your salary and deductions
- If you are self-employed you will need a letter from an accounting officer confirming your income, or a statement of assets and liabilities
- 6 months’ worth of bank statements
- Proof of current residential address
- Copy of marriage certificate or Antenuptial contract (if applicable)
If you are self-employed, keep in mind that the perceived risk of being self-employed is much greater in South Africa, than in other parts of the world.
Banks often become anxious because of the lack of a guaranteed income from a single source. They generally want to see a reliable source of income, consistently.
It’s always advisable to get your credit report. Check it and make sure that there aren’t any errors. If there are, have them fixed. If you find that your credit score is too low, do what you can to improve it. Do this by getting rid of any outstanding debt you may have.
Where possible, you should get pre-approved. This can be helpful for you when negotiating. Read the fine print. Ask your lender about estimated closing costs, loan origination fees and transaction fees. If it will help, enlist the help of a legal expert to help you clearly understand the terms of the mortgage.