If you have recently thought that you no longer want to waste money on paying rent and you would rather use the money to pay into a home loan then it is possible to do so. For your own purposes, using the mortgage calculator will give you an idea of what the payments will be according to the amount you wish to loan for the purchase of your new home. Continue to read the home loan qualification criteria to see what your chances are of getting the loan you need.
There are factors and criteria that are required to qualify for a home loan. This means that the bank needs to know that you are able to pay money towards the loan every month. Therefore proof of a job, the amount you get paid and how long you’ve worked at the company or if you are self employed you need to at least have 2 years proof, your ID is also important. As the bank needs guarantees, you would need to fit into a certain income bracket to qualify for a home loan which is calculated according to your means.
There are two options for first time buyers: 1.If you have money that you can put down as a deposit for a home loan or 2. you do not have a deposit and you qualify for a home loan then the bank can grant you over a 100 percent loan.
In order to determine the amount you will pay the bank back every month is based on the interest rate. If you have money and you put a deposit down depending on the amount of the deposit in ratio the cost of the house; the bank will calculate a percentage using a loan to value ratio. This ratio refers to the amount of the bond that you’re applying for and the cost/value of the property you want to purchase. The percentage that is calculated will determine the amount which will become part of the interest rate you pay every month.
The minimum bond you can apply for is between R100 000 and R150 000 so if your LTV which is your Loan To Value ratio is calculated at a low percentage this means that the interest rate will be low as well; as it is directly proportional to the interest rate in other words the lower the LTV percentage the lower the interest rate will be to pay the bank back each month.
If you do not have a deposit then you can ask for a home loan that covers everything. Often first time home owners do not have extra money to put down as a deposit so therefore the bank makes provision for this. A bond for over a 100 percent normally 110 percent bond will cover the cost of the home and other home loan expenses including transfer fees for example. As there is always a time period associated with applying for a bond the norm in this case would be thirty years. As terms and conditions vary inquiring at a bank or using findbond.co.za can assist you with your requirements and needs.
Investing in your own home means that you can renovate or build on to your home as you like and you have the financial aid to do so. Many banks or financial institutions have requirements in order for you to qualify therefore making sure that you have a reliable and stable form of income is the first step to take to qualify for a home loan.
The two different ownership types for residential property are Freehold or Sectional title. Know the difference between the two and what your obligations are.
The most common form of freehold ownership is a free standing house which has it’s own erf number. The other form of freehold which is becoming more and more popular as people move away from large properties is a freehold cluster home.
In both of these cases the property would be owned by you along with any improvements thereon (house, swimming pool etc) and you would be responsible to pay for rates, sewerage and electricity directly to the council.
A less common form of freehold ownership would be in the form of a smallholding which would be less than 20 hectares and within 150km of an urban area.
On a freehold property, you are generally entitled to do as you please within the council building regulations and would not need to seek approval for any alterations or additions you may wish to do apart from submitting plans and having them approved by the local authority. In a small number of cases, for example themed cluster developments, you ,may need to seek approval from the developers to ensure that the overall theme of the development is not compromised.
A sectional title unit is simply owning a portion of the buildings and common property of a development. The most common forms of sectional title ownership are in the form or flats/apartments and townhouses.
Your section would be demarcated as the portion within the walls that you live. You would also be allocated an undivided share of the common property usually calculated as a percentage of your units square meterage expressed as a percentage of the total square meterage of the development. Some sectional title developments also offer ownership of the parking bays and these sections can be sold or purchased separately. In areas like Cape Town it is particularly important to ascertain whether the parking bay forms part of the common property with exclusive use or ownership of the parking bay/s is transferred. Parking bays have sold for large sums of money in areas where there is limited parking like Clifton and Bantry bay.
In a sectional title development you would pay a levy to the body corporate which is intended for the upkeep of the exterior of the building, the common property and any services required like security, auditing fees or general maintenance and upkeep of the development as a whole.
In recent years sectional title owners now each receive a rates account, where before the rates were calculated for the entire property, billed to the body corporate and then divided according to each units square meterage and share of the common property.
When applying for a home loan, be it a new home loan or a second bond you will need to collect the documentation required by the banks to efficiently evaluate the home you wish to purchase, the improvements or alterations you wish to do as well as your personal financial documentation.
The documentation you present to the banks must be 100% accurate and in accordance with what your originator requests. Home loans have been turned down because of incomplete or unclear documentation. What they need to see is clear evidence of the source of your income, details of any additional income sources and the stability of your financial history.
Basic home loan qualifying criteria (personal)
- A monthly income of at least R 15 000 (single or joint) is required.
- Only residential properties may be financed.
- All other normal credit criteria apply.
When making your application you will need to authorize the bank to obtain your personal credit profile from one of the credit vetting agencies like Experian. This is used only to evaluate their risk and will play a role in determining the interest rate the bank offers as well as the percentage deposit if any they require and whether or not a surety is required.
Documents required for an application
- Fully completed and signed application forms.
- Copy of your Identity Document/Passport (the person in whose name the bond will be registered as well as any sureties)
- Proof of income in the form of payslips (at least 3 months)
- Copy of the Offer to Purchase showing the property details.
- 3 recent and months of bank statements showing your salary payment.
With these documents readily available the bond originator can begin completing your home loan application forms, check credit ratings and advise you of any additional documentation required or action to be taken on your credit profile.
The advice of a bond originator is vital to a successful bond application and an experienced bond originator will not submit your application until such time as he is confident that the banks will approve your home loan and he is in a strong position to negotiate a favourable interest rate. In some cases as much as 2.5% below prime interest can be achieved by a good originator dealing with a strong application.