The adventure of finding the right realtor, the perfect area and the house you’d love to call home is exciting and seldom causes any problems, but knowing what is expected of you once you’ve made your decision is a step in the right direction of securing your choice.
For many potential home buyers, the actuality of buying a house involves needing to obtain a home loan. This is a fairly straightforward process that requires little work from you if you approach any number of home loan bond originators, like ooba Home Loans or SA Home Loans. You can even get a home loan estimate through a property portal like MyProperty. Alternatively, you can apply directly at any of the major banks.
A home loan is a type of financial product that is put in place to assist the potential buyer to do just that, buy a home. The loan is payable over a set period of time, usually 20 or 30 years (but there are other periods to choose from) and is considered a form of long-term financing.
One factor that must be noted for anybody wanting to apply for a home loan is one’s credit history. Your credit history is important when applying for a home loan, with your credit score being especially important.
To even be considered, your credit score should be at least 610 or higher. A score exceeding 650 is favourably regarded and sees your chances of a successful application looking even more promising.
The exercise begins with you, the borrower, supplying the home loan consultant with a financial breakdown of how you would like to purchase the home. Are you giving a deposit (a deposit is typically calculated as being a percentage of the purchase price), will you be selling a home first to pay towards this home (this counts for current homeowners), and what term you would like to take the loan over. The consultant will then ask you for certain documentation.
The process differs between whether you are permanently employed or self-employed but is pretty straightforward, nonetheless. Bear in mind that you must meet the minimum requirements of being at least 18 years old, permanently employed for at least 6 consecutive months, or self-employed for at least the past two years before applying. Also, take note that it’s best to have an idea of what you can qualify for before getting the ball rolling. This is a prequalification.
This is a procedure wherein a home loan comparison service evaluates your financial status in a manner that is similar to what the bank would do. After that, you get important information about your credit history, your prospects of getting approved for a home loan, and how much you can likely afford when hoping to buy a home.
When applying for a home loan as someone permanently employed, you'll need to provide various documents to verify your financial status. These include:
Your latest salary slip or three payslips (only applicable to employees who earn commission or overtime).
Your last three months' bank statements for you and your partner's accounts, if you are Married in Community of Property (COP).
Copies of your South African ID documents for yourself and your partner, if applicable.
A statement of monthly income and expenses, including debt repayments and living expenses.
A personal assets and liabilities statement (your consultant will be able to assist you with this step, or the bank will provide you with the necessary documentation to be filled out).
And the copy of the purchase agreement.
When applying for a home loan as a self-employed individual, the documentation that is required of you differs. This includes:
The need to obtain a "letter of drawings" from your accountant to verify your income.
You will also need to provide personal bank statements for the last six months, as well as for your partner if married COP.
You will need to submit a personal assets and liabilities statement as well as business account bank statements from the previous six months.
You will have to include the last two years' annual financial statements (AFS) and current management accounts if AFS are dated more than six months prior to the application.
Provide copies of ID documents for yourself and your partner.
Include a copy of the purchase agreement.
In either scenario, the process should be easier when approaching a bond originator as they have good relationships with many of the major banks. Each bank has its own set of criteria when dealing with whether an applicant can obtain a loan or not and if so, what percentage of the property value it will be. The bond originator can easily work with these criteria in mind and often is able to obtain a loan. This is not to say that using a bond originator is the way to go though, the decision is entirely up to the buyer. With that thought in mind, there are a few other things you should take note of in regard to home loans.
Interest rates can vary depending on market conditions and the lender’s policies. All banks work on the prime lending rate, and thereafter make decisions based on the client’s credit history and give their own interest rate when offering you a home loan. The current interest rate will affect your overall monthly payment amounts too. This is an important aspect to take in consideration when looking at affordability.
After considering your debt-to-income ratio the lenders are able to determine whether you can afford the monthly bond repayments. What this means is that the lender ensures that your total debt obligations don’t exceed a specific percentage of your income.
The bond initiation fee is a charge imposed by your bank for initiating and opening your bond. The fee is capped at R6,037 and can be added to your bond amount, although paying it upfront can save you on interest charges.
Once your home loan has been approved, you should be aware of the extra costs that are associated with purchasing a property, as they are not included. Transfer duties, legal fees, mandatory insurances, and more, are things to look out for. It’s best to be aware of these as they will also affect your affordability.
When you are ready to buy your home, whether it’s your first or third, it is especially important knowing that a home loan is obtainable without any real issues when you have the above information locked away in your bank of knowledge.
With this knowledge you can move ahead with finding your home and having fun while doing it. Buying a house should be an experience you enjoy, not shy away from. And moving should not be a nightmare scenario either. If anything, finding the right team to help you move into your new home is but one click away.
After hopping over the hurdles that is the home loan process and finally signing on the dotted line, you’ll be ready to move into your new home. Check in with Wise Move, we’ll be able to pair you with the very best moving team to help you make this last step a cinch. Sit back, relax, and let Wise Move help you!
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