13 Feb 2013
The current lending climate is tough for first-time buyers particularly with the stringent National Credit Act requirements and the worldwide recession affecting banks and how strict they are when it comes to approving home loans.
However, there are a few tips that first-time buyers can follow to make the process of applying for a home loan and ultimately owning their desired property a little easier, says Francois Venter, Director of Jawitz Properties.
He says before you even begin house hunting, the first step is to establish what home loan amount you can afford.
The National Credit Act calls for banks to review an applicant’s gross income thoroughly, 30 percent of which is generally allocated to cover home loan repayments while also considering monthly expenses such as groceries, personal loans, current rent, utilities, school fees, and even entertainment and clothing expenses, among other items.
Venter says the banks have to be sure you can afford to pay back your minimum repayments on the amount they lend you, while maintaining a realistic lifestyle.
To calculate the size of the bond you can afford, visit the websites of bond originators or banks as many have bond calculators that are easy to use.
Another step in the right direction is to do your best to keep a clean credit history as this will count in your favour. The banks will look into your credit payment history and it may count against you if you have defaulted on a debt or are in arrears with any of your repayments, he says.
If you can afford to put down a deposit that will also help in securing your dream property.
Venter says statistics indicate that buyers who are able to put down a deposit are more likely to get their bonds approved and may even get a more favourable lending rate which can mean less interest to be paid over the bond term. He says sellers are also more inclined to accept an offer if a buyer has a deposit.
The process of applying for a home loan can be tedious so Venter recommends that first-time buyers seek the assistance of a bond originator once they’ve found the property they want to buy.
He says these are professionals who know exactly what the banks are looking for, can assist with all the paperwork and ultimately negotiate the best deal should your bond application be approved.
A bond originator will assist in approaching as many banks as possible for consideration and will require a number of items to get the process started including three months of payslips and bank statements, a detailed income and expenditure statement, a statement of your assets and liabilities and a copy of your ID.
If you’re self-employed, the requirements are more onerous and include two years of financial statements, cash flow forecast, and a personal statement of assets and liabilities, as well as the submission of forms such as an IT34 notice which indicates how much is owed to or by SARS.
“Keep in mind that if your bond is approved you will have other expenses to consider such as bond registration and the transfer costs of getting the property into your name, as well as paying any attorneys who have been involved in the transaction.”
He says it would be wise to either include the additional costs in your bond application, or to make provision for these costs in your budget. The additional costs you will pay will depend on the total amount of your bond plus administration fees, he says.
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