How to Qualify for a Home Loan

It is very seldom that a buyer can make a cash offer when it comes to buying a house. It is for this reason home loan products are an essential financial service for buyers entering the property market or even upgrading. In this article, we will summarise the methods and procedures used by banks to afford you a loan covering the following topics:.

• What home loan can I afford?
• Using a home loan affordability calculator
• Applying for a home loan
• Steps in the home loan application process
• Additional factors to consider when applying for a home loan

What Home Loan Can I Afford?

Qualifying for a home loan is all well and good. Making sure you can afford it is equally important. To avoid future financial difficulties, don’t be tempted to overextend yourself. Banks calculate the maximum home loan that you can qualify for based on your monthly/joint income.  Most banks will only offer you a loan that will have a monthly repayment that does not exceed 30% of your joint/single income.

Using a Home Loan Affordability Calculator

The Bondspark loan calculator is an automated tool enabling users to determine the financial implications of changes in one or more variables in a home loan financing arrangement. The Home loan calculator is used by consumers to determine monthly repayments and the financial suitability of the home loan applicant. Click here to access the Bondspark home loan affordability calculator.

Applying for a Home Loan

To pre-qualify or qualify for a home loan, banks will assess your ability to afford, and willingness to repay, any money granted to you. They will:

• Review your income and expenses, including the reliability of your income. Remember to consider your new monthly anticipated expenses including:
  1. Higher municipal rates.
  2. Life protection cover to the value of your loan, at minimum.
  3. Higher home-owners insurance.
• Authenticate your income and employment.
• Assess your past financial track-record.
• Check and assess your credit score and creditworthiness.
• Verify your identity.
• Determine your age in relation to the period of the loan. Older people will generally only qualify for a shorter loan repayment period as they are nearer to the end of their prime earning years.
• Review security and collateral including existing assets and life protection cover.
• Consider your statement of assets and liabilities.

Steps in the Home Loan Application Process

To process and approve a home loan your bank will require:

• Fully signed completed application form.
• Copy of identification/s.
• Proof of joint/single income.
  • Salary
    • In the event you are providing an Employer Guarantee you must provide:
      1. Z572/3, if you are an employee of the State.
      2. Letter of Guarantee from your employer if you are employed outside of the State.
  • Or Business Income
    • Audited Financial Statements, Founding Statements, and Memorandum of Articles of Association, will be required to evidence your earnings from your own business.
  • Proof of Rental income and/or interest income from other property and investment assets.
  • Proof of Maintenance income.
• Copy of “Offer To Purchase” including property details.
• 3 months bank statements.
• An onsite inspection.
  • The banks will verify the value of the property by appointing an agent of the bank to inspect the property.

Additional Factors to Consider When Applying for a Home Loan

Being able to put down a large deposit and/or show regular additional income, from a rented property or savings, investments, or other assets, will be a plus factor in being granted a Home Loan.

However, please note that if the bank believes the value of the property is not commensurate with the purchase price, use this as a safeguard against paying too much. If they decline a higher value, you can also be assured they are protecting you from future financial difficulty. In fact, by borrowing from the bank you can also be assured that the title deeds and ownership are watertight.

Summary

The primary purpose of a home loan is to facilitate the buying of a property or finance the renovation/construction of one. For most people property is the biggest investment they will ever make and not everyone can afford to pay off a home instantly. 

Determine your affordability upfront by using the Bondspark Loan Affordability Calculator.

Home loans allow borrowers with a good credit history accessibility to lower interest rates hence making it affordable to own a property with a payoff of 2-3 decades. Contact Leadhome for leading experts that will help you get your dream home and guide you on how to qualify for a Home Loan.