Make sure you get the home loan you deserve

You have found the ideal property, and you can’t wait to move in. You know just how you would like to renovate the living areas, redecorate the bedrooms and revamp the garden. In your mind, you have already moved in.

Unfortunately, most people first need to go through the home loan application process before they can call their chosen property home.

Following the right advice from a knowledgeable and experienced mortgage originator can simplify the bond application process and be less time-consuming.

Director of digital mortgage brokering service MortgageMe, Andrea Tucker, shares some tips on how to be sure of having your home loan approved.

Credit score

One of the first things banks examine before approving a loan application is your credit score. Your credit score considers how often you apply for credit, whether you’re making your debt repayments on time, and whether you have any defaults or credit infringements against your name.

Tucker advises that you build a good credit history before applying for a home loan.

You can do this by using store credit or bank credit cards, opening a cell phone account, or applying for vehicle financing. Then, you need to be diligent about meeting your monthly payment deadlines.

To evaluate your progress, check your current credit record once a year through any of the credit bureaus registered in South Africa. There is no charge for this.

“If you’ve recently gone through tough financial times and have defaulted on payments, the banks may turn down your loan application. Be aware of this and delay your house hunting until your credit record has improved to acceptable levels,” says Tucker.

A good credit score is at least 600 – with 650 and above being ideal.

Affordability

Before granting a loan, banks perform an affordability assessment to ensure you can afford the monthly repayments. The bank will look at your total monthly income before tax and expenses have been deducted, and then your net monthly income minus your monthly expenses. They take into account other loans such as vehicle finance, as well as credit card payments, and your household expenditure.

Before submitting an application, you should do your own affordability assessment which shows you your ability to repay the loan and possibly where you can cut back on expenses. Private Propery has an affordability calculator, which makes this easy to do.

Deposit

Your deposit size plays a massive role in the home loan approval process. The larger your deposit as a percentage of the property’s purchase price, the better your chance of securing 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 payments will be lower.

“The minimum deposit on a home is usually at least 10% of the home purchase price. However, a 20% deposit will go a long way to helping you secure the loan,” says Tucker.

Saving for a deposit also shows lenders that you are serious about the loan and demonstrates financial discipline.

Work smart

To improve your chances of having your bond application approved, it is a good idea to apply to several banks simultaneously. This is where assistance from 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 obtain pre-approval for a loan so that you have a good idea of the price range of homes to look for.

They will also help you collate all the documents the banks need to evaluate your home loan application. These include copies of identity documents, recent bank statements and other proof of income such as payslips as well as household expenses. The banks will also need an offer to purchase signed by the sellers and buyers.

Tucker says: “The online mortgage origination process empowers homebuyers to become their own originators by guiding them through the simplified application process.”

“Instant access to South African lenders means the best rates are shared with users side-by-side, allowing them to get a full, realistic picture before making their decision.”

Writer : Sarah-Jane Meyer