Although in an ideal world, most of us would elect to purchase property in our name by means of a cash transaction, the reality remains that the majority of property transactions in South Africa are financed in one way or another.
Thus, for many who have taken the great leap of purchasing property for the first time, the home loan application process can result in one of the most daunting experiences, especially where one possesses little to no knowledge of the processes involved.
In an attempt to make the home loan application process a little less overwhelming, the following paragraphs highlight certain factors that such persons should consider and take into account when applying for their first home loan.
It is advisable for potential buyers to obtain their own credit report – by doing so one can determine whether there is any information that could hamper one’s chances of getting one’s home loan approved. This is indeed a worthwhile exercise, as it may bring certain factors to the applicant’s attention, such as those secondary or tertiary credit card accounts where they might be in arrears and thus may need to catch up on their payments.
Such accounts often result in the applicant being labelled as late-payers, which is detrimental to the home loan application and approval.
Additionally, by engaging in this exercise, the applicant may then take the next step of settling any credit that he or she may no longer need, as this ties in with the aspect of affordability as well as that of disposable income; two aspects that are of crucial importance when the financial institution considers granting the home loan.
Therefore, having a good credit score is extremely important, as it will not only determine whether the home loan will be approved, but it will also affect the interest rate you will be granted.
Further factors to consider include:
When applying for a home loan, applicants are generally required to produce their latest payslip as well as three months’ bank statements. This is for obvious reasons, as the financial institution who may potentially approve the home loan will need assurance that the applicant receives a regular income.
As for self-employed individuals, they may be required to produce a minimum of six months’ financial records or bank statements. Where the declaration of expenses is concerned, it may be advisable for applicants to keep a record of their monthly expenses, in an attempt to determine the exact amounts that they are spending each month.
Furthermore, where a couple who would like to jointly finance a property, each party should look at their expenses and collectively determine their income and expenditure in order to provide a clearer image of where they stand financially.
Additionally, the ability to pay a deposit is not always deemed to be a determining factor in the approval of the home loan. However, it should definitely be noted that paying a deposit when purchasing property is not only a massive money saver in the long run, but it can play a role in the approval of the home loan application.
The most important factor for home loan applicants to bear in mind is that the financer has the power to withdraw the home loan approval at any point during the sales process.
In most cases where the financier withdraws the approval, the reason is that the person has incurred more debt. Therefore, the necessary caution and discipline exercised prior to and in the application process should be maintained.
It is thus advisable for applicants to not incur any further debt or to make any large purchases until the registration of the bond and transfer at the Deeds office. The applicant should always keep in mind that although it can be very easy to get caught up in the excitement of obtaining their first property, the financer has the ability to rescind the approval at any time prior to registration. It is therefore best to leave the purchasing of furniture or other household items until after the property has been registered in his or her name.
Our Conveyancing and Property Law Department provides specialized services over the full spectrum of commercial and residential property, and our experience includes:
Currently our law firm employs 12 conveyancers and two conveyancing consultants. We are able to handle large volumes and our reporting systems are state of the art.
We have associate branches all over the country ensuring that we can provide a service to a national client base.
Contact our conveyancing attorneys in Cape Town for assistance.
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