You have found the perfect property and you can’t wait to move in. You know how much you would like to renovate the living rooms, redecorate the bedrooms and revamp the garden. In your mind, you have already moved in.
Unfortunately, most people have to go through the home loan application process first before they can call their chosen property.
Following good advice from a knowledgeable and experienced mortgage lender can simplify the bond application process and take less time.
MortgageMe digital mortgage brokerage service manager Andrea Tucker shares some tips for making sure your home loan is approved.
One of the first things banks look at before approving a loan application is your credit score. Your credit score takes into account how often you apply for credit, whether you pay off your debt on time, and whether you have any defaults or credit violations against your name.
Tucker advises you to build up a good credit history before applying for a home loan.
You can do this by using store or bank credit cards, opening a cell phone account, or applying for vehicle financing. Next, you need to be diligent about meeting your monthly payment deadlines.
To assess your progress, check your current credit report once a year with one of the registered credit bureaus in South Africa. There is no charge for this.
“If you have recently gone through a difficult financial period and have defaulted on your payment obligations, banks may refuse your loan application. Be aware of this and delay your home search until your credit report has improved to acceptable levels,” says Tucker.
A good credit score is at least 600 – 650 and above being ideal.
Before granting a loan, banks do an affordability assessment to make sure you can afford the monthly repayments. The bank will look at your total monthly income before taxes and expenses, then your net monthly income minus your monthly expenses. They take into account other loans such as car financing, as well as credit card payments and household expenses.
Before submitting an application, you must do your own affordability assessment that shows you your ability to repay the loan and possibly where you can reduce your expenses. Private Propery has an affordability calculator, which makes it easy.
The size of your deposit plays a huge role in the home loan approval process. The larger your deposit as a percentage of the purchase price of the property, the better your chances of getting a home loan. This is because there is less risk for the bank. For this reason, the bank will almost certainly offer you a lower interest rate on the amount borrowed.
With a higher deposit, the amount you borrow will be less, so your minimum monthly payment will be lower.
“The minimum deposit on a home is usually at least 10% of the purchase price of the home. However, a 20% deposit will go a long way toward helping you get the loan,” says Tucker.
Saving for a deposit also shows lenders that you are serious about the loan and have financial discipline.
To increase your chances of getting your bond application approved, it is a good idea to apply to several banks simultaneously. This is where the assistance of a reputable home loan origination service comes in handy.
Mortgage originators offer a range of services, including submitting an application to major lenders on your behalf. They will help you get pre-approved for a loan so you have a good idea of the price range of homes to look for.
They will also help you gather all the documents the banks need to assess your mortgage application. These include copies of identity documents, recent bank statements and other proof of income such as payslips as well as household expenses. Banks will also need an offer to purchase signed by sellers and buyers.
Tucker says, “The online mortgage origination process allows buyers to become their own originators by guiding them through the streamlined application process.
“Instant access to South African lenders means the best rates are shared with users side-by-side, allowing them to get a complete and realistic picture before making their decision.”
Screenwriter: Sarah-Jane Meyer