Many people have taken advantage of the low interest rates and bought homes recently.
Then there are others, who can afford to buy and pay the monthly bond repayment but who either don’t have a deposit or have a bad credit record and therefore don’t qualify for a home loan through one of the major banks or lending institutions.
These days, most rental agents and property landlords won’t even consider your application to rent if you don’t have a “clean” credit record and a deposit.
This makes it very difficult for those who were financially impacted by the initial hard lockdown and skipped payments on their debt.
One thing is clear – if you have a low credit score, with defaults or judgements on your credit report, your chances of getting approved for a home loan are slim to none.
So now you must rather look at increasing your credit score by getting your account payments up to date and then relook the possibility of buying a home in a few months time.
However, if you have a good credit score and a deposit, then according to banks, you will need the following to apply for a home loan:
If you are employed:
- 3 months latest salary slips
- 3 months latest stamped personal bank statements
- Copy of your ID document
- Copy of marriage certificate or ante nuptial contract (ANC)
- Copy of the offer to purchase (OTP)
If you are self-employed:
- Proof of income: This needs to be a letter of drawings from an accountant
- 6 months latest stamped personal bank statements
- Personal assets and liabilities statement
- Latest stamped 6 months business account bank statements
- Latest 2 years annual financial statements
- Where annual financial statements are older than 6 months to date, current management accounts not older than 2 months signed by the applicant and accountant must be provided in addition to the annual financial statements
- Copy of your ID document
- Copy of marriage certificate or ante nuptial contract (ANC)
- Copy of registration documents or trust deed
- Copy of the offer to purchase (OTP)
It’s clear from this that you really need to have all your ducks in a row if you are self-employed and want to apply for a home loan.
Use of bond originators:
When you are ready to apply for a home loan, you might want to use the services of a bond originator.
A bond originator is basically the person between an applicant (you) and the various banks that they submit your application to.
What is nice about a bond originator is that if you are nervous about dealing with banks, they will do all the work for you.
You only have to fill out one application form, and your bond originator will submit it to anywhere from 3 to 8 banks.
You will then have offers to compare.
Banks will rate you differently on what they deem to be your risk, so your offers on interest rates may differ.
Contrary to what some believe, you (as the person applying for the home loan) do not pay the bond originator. Their services to you are free.
It is the bank that pays the bond originator a commission if you take up their offer.
The bond originator’s commission does not get added to your home loan or interest rate.
Bond originators make the process of applying for a home loan so much easier and less stressful.
They are easy to find on the internet and most of their websites have easy to follow prompts and tools to assist you upfront with your eligibility and affordability of a home loan.
Expenses to plan for when buying a home:
There are quite a few expenses that need to be factored in and planned for when buying a home.
Bond registration, transfer costs and other attorney costs: Make sure to mention this to your agent/bond originator/bank consultant so that you have an idea of what amount you are looking at.
Moving costs: If you are looking to make a big move, compare the prices of different moving companies. Sometimes the rates during the middle of the month are lower than at month end.
General repairs of the new house: Even if you move into a brand-new house, you are going to want to clean it. Factor in the cost of detergents and cleaning materials.
If the house isn’t brand-new, set money aside for touch-ups like painting, replacing broken tiles, fixing a ceiling and so on.
Getting connected: Put money aside for telephone, electricity and internet connections.
Security and alarm system: Enquire with your new neighbours what they spend on securing their properties, what security company they use.
Insurance: Make sure you have insurance in place for the structure of your home as well as the contents.
These low home loan rates are not going to last forever.
Take advantage of them now if you are in a position to buy a house.