Set yourself up to qualify for a home loan!
So you think you’re ready to buy your first home. Before you walk into the bank or fill out an online application there are a few serious things you need to know about the home loan process.
Make sure you’re actually ready, for reals:
You may think you’re ready to buy your first home but are you in fact financially secure? Buying a home is a long-term and ongoing financial investment and you will need to pay back the loan with interest each month. There are also additional fees in buying your dream home including the deposit, moving costs, home insurance, taxes and levies. These add up to more than you may initially expect. The repayment, added interest, insurance and tax should never be more than 25% - 30% of your gross income and many financial institutions which offer home loans will not consider giving you a loan if these costs exceed 30%.
What do you need in a home?
When you’re looking at properties to purchase, consider what you will need to get out of the home on a day to day basis. How large is your family right now? Will you be having any children in the next five years? Is the area safe and secure? Is the house an appropriate distance from your work, children’s schools, shops, and doctors? These factors should be considered.
Calculate your bond:
Work out how big your home buying budget will be by using an online bond calculator. This isn’t a definitive answer to what a financial institution will provide you but it can give you a good idea of what you will be able to afford. Once you figure out what the budget is, you can start looking at homes on sale and meeting agents. Click here to try out our bond calculator: https://www.homesofdistinction.co.za/calculators/
Get ready to apply:
If you have any outstanding debt, it’s important to pay it off before you apply as the loaner will be running a credit check on you to see if you’re a good candidate for a home loan. As with everything else in life, applying for a loan will require a significant amount of paperwork for the loan application to be successful. Ensure you have the following documents on hand when you go to apply for the loan:
- Proof of income
- The last three months bank statements
- A list of your personal assets and liabilities for larger loans
- Certified copy of your ID
- A copy of your marriage certificate and ANC contract if applicable
- A copy of the purchase agreement
The final stages:
The last few stages of the process can take up to 12 stressful weeks. With your documents in hand, apply to the loaner of your choice and await approval for the loan. A property evaluator assigned by the bank will need to inspect the home before they give you the loan to ensure that the property is well documented. Finally, if all goes well, you will be able to work out the final details and sign the Letter of Acceptance (LOA). It is important to read the LOA careful and ensure you understand every word before signing it and the bond registration documentation.
Buying your first home is one of the biggest investments you will make and knowing the process to get the loan and make your dream home yours is a bit of helpful knowledge. Once you have the loan approved and the home in mind, it’s time to make an offer and start the next exciting stage in your life and in your new home.
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12 Oct 2018
Author Lillian Rencken