- 1 - Your credit record
- 2 - Proof of income
- 3 - A list of your current debt commitments and living expenses
- 4 - Proof of cash reserves and other assets
- 5 - Use of property
Failing to prepare is preparing to fail, as the old saying goes, and it is no different when it comes to applying for your home loan.
Your real estate agent will be asking you a lot of questions but you can make the process easier by having the necessary documentation ready when asked for it.
There are many documents that you need to obtain in order to complete your home loan application successfully.
Here are a few ways that you can speed up the process and be one step closer to your dream home:
1 – Your credit record
You can obtain a credit record for free every year and it is a good idea to check yours before you even think of applying for a loan.
You might see a few oddities and try to clean it up before presenting it to a bank.
Not only will it improve your chances of getting approved by a bank or a financial institution, but you might even secure a better interest rate.
You should also not apply for any new credit before you apply for a loan and the home is transferred to your name.
2 – Proof of income
Payslips, copies of work contracts and any other documentation pertaining to your employment should be ready as soon as possible.
If you are self-employed, you need personal and business bank statements that show you have been working for the past 2-3 years.
Whether you are employed by another person or working for yourself, you need to provide your latest tax returns and assessments.
And if you have any other sources of income such as other properties, alimony, or investments, documentation for this must be provided and it must be declared as legit.
3 – A list of your current debt commitments and living expenses
Lenders basically want to know if you will have enough of your income left after the monthly payments have been made so that you can comfortably survive and afford your mortgage payment.
The more debt you have, the less likely you will be approved for a home loan. It would be a good idea to start getting rid of your debt.
Debts and expenses that should go on the list would be student loans, car loans, credit card and store balances, rent, school fees, utility costs, and medical aid contributions.
4 – Proof of cash reserves and other assets
Your real estate agent will want to know how much cash you have available to put down as a deposit.
They will also need to know if you will have money available to cover the additional costs. The bigger your deposit, the more likely you are to qualify for a loan and the more likely your application will be approved.
Lenders are prone to give buyers the advantage if they commit some of their own funds to the purchase. If you have other assets to your name, like a second property or a holiday home, this should also be provided.
5 – Use of property
This should not be a problem if you are going to use the property as your primary place to stay.
If you are buying it in order to turn it into a rental unit, you should provide a copy of your current lease.
It would also count in your favor if you could get an estimated income figure from a managing agent that will declare how much money the rental unit will bring in each month.
For secondary properties, banks usually use different criteria when assessing loan applications so be sure to communicate the purpose clearly to your real estate agent.