- #1 Credit record
- #2 Proof of income
- #3 List of your current debt commitments and living expenses
- #4 Proof of cash reserves and other assets
- #5 Use of property
You know the old saying ‘failing to prepare is preparing to fail’?
This applies to most things in life including the home loan process.
Preparation should already start when you are busy with your application and it should not be left to the last minute.
Your bond originator might ask you a few questions, yes, but if you have the necessary documentation with you, you will definitely assist in speeding up the process.
Here are some of the things that you can do in order to ensure an efficient home loan application:
#1 Credit record
Any financial institution or home loan originator will ask for your credit record, so it is a good idea to have a look at yours before you apply.
You are entitled to a free report every year but you might find that you need to clean it up a bit before you apply.
Improving your credit rating will definitely improve the chances of being approved for a home loan. It can also help in securing a better interest rate.
Don’t apply for any extra credit until your home loan application has been approved and the new home has been transferred to your name.
#2 Proof of income
You should prepare your pay slips, copies of work contracts, and any other type of documentation that will confirm your employment for the past three months.
If you are self-employed you need to present personal and business bank statements as well as financial statements for the past six months.
In both cases, you need to also take your latest tax returns and assessments as well as proof of any other source of income like rental properties, alimony, investments, or a home-based business. These must also be declared in order for you to have a successful application.
#3 List of your current debt commitments and living expenses
If you have to show your income, then it makes sense to show your expenses as well.
Bond originators and financial institutions want to determine whether you will be able to meet the monthly instalments whilst living your current lifestyle.
The more debt you have, the less likely you will be to get approval.
Debts and expenses you can include on the list are student loans, car loans, credit cards, store card balances, utility costs, and even medical aid contributions.
#4 Proof of cash reserves and other assets
Your bond originator needs to know how much cash you have on hand and if you are able to afford the deposit.
They also need to determine whether you will be able to pay the additional costs associated with buying a home such as bank and legal fees and any transfer duty.
The bigger the deposit you are able to put down, the better the chances of the loan being approved.
If you have other assets like a holiday home, rental property, a share portfolio, or valuable collectibles, you can also add it to your list.
#5 Use of property
This is generally not an issue when it comes to home loan applications but you need to declare what the property is going to be used for.
If it is for primary living, it will be simple, but you might need some extra documentation if you are planning on renting it out.
You should then provide a copy of the lease agreement or an estimate of how much you will receive each month. This can be calculated by your rental agent.
It will also make a difference if you are going to purchase a secondary property or if you are going to build on vacant land. A different set of credit criteria will then be used.