Purchasing a new home is one of the biggest financial investments you’ll ever make, and no doubt you’ll have many questions regarding the process. Most first-time real estate buyers do!

If you are secure in your job and earn a regular monthly salary, you’ll have a fairly good idea of whether or not you can afford to buy a home. However, if you are self-employed, your income may be unpredictable, making it more difficult to know for certain whether you are in a position to purchase.

In fact, the home loan industry is experiencing levels of activity not experienced in years – particularly amongst first-time buyers.

The Home Loan: Your best option for funding a property purchase:

The first thing you need to understand is the purpose of the home loan. Rather than pay the full value of a property upfront; you can get a lender, usually a bank, to finance the property purchase for you. The loan they provide you with to fund the property is referred to as a home loan.

You’ll pay them back the value of the home loan in installments over a set period of time. The bank retains possession of the Title Deed for the property until you have fully paid back the home loan.

As well as paying back the home loan, you’ll also have to pay interest on the loan. The home loan interest rate determines the monthly home loan repayment which includes the monthly interest debited to the home loan account.

Are you on the brink of applying for a Home Loan?

First things first, you will need to calculate the monthly home loan repayment that you will be able to afford. The amount is calculated based on your monthly household gross income and expenses. You can also check your bond repayments on a desired bond amount. Make use of our handy “Bond and Affordability Calculator”

There are a few things relevant to South Africans hoping for a positive outcome from their application for finance to purchase a property.

It goes without saying that you need a good credit bureau track record when it comes to managing credit before a bank will consider granting you a home loan. You need to be able to show that you comfortably meet your monthly debt commitments payable and on time.

You need to be 18 years or older, permanently employed for three consecutive months or self-employed for the past two years.

In terms of the documentary requirements for the application itself, here are some guidelines to follow:

Proof of income: you must supply your latest salary slip. Some institutions may ask for the last three salary slips, especially if you earn commission or overtime. If you are married in community of property (COP), your partner will have to supply the same.

You need to provide a copy of your South African ID document (and your partner’s, if applicable).

You will need to supply the bank with a statement of your monthly income and expenses, which includes your monthly debt repayments and living expenses.

The bank will ask for a personal assets and liabilities statement.

Of course, you’ll need to hand over a copy of the Offer to Purchase agreement too. To view a  comprehensive list on the documents needed, check here.

How to get a loan with a low credit score:

Many people only realize that they have a low credit score or problematic credit history when they apply for their first loan. If you fall in this category- don’t panic. There are lending options out there for you – including loans designed for people with low credit scores or issues with their credit histories.

Here are some of the basics about having bad credit, what bad credit loans are, as well as how you can improve your credit rating.

If you experience a bad credit rating, it means you may have struggled to pay back your debts and a mark has been left on your report by a lender or financial institution. This might be for several reasons, for example:

• You haven’t made the monthly repayments on time,
• You’ve missed the repayments altogether,
• You’ve been declared bankrupt,
• You’ve had a court judgment against you.

Things to Know when it comes to Loans for Bad Credit:

Loans for bad credit tend to be an expensive way to borrow money. Before you take out this kind of loan, you should make sure to consider all of your options after speaking with your lender or a debt counselor. If you do take out this type of loan, you should try and pay it back as quickly as you can to avoid expensive interest rates.

Try not to apply for multiple loans at once as this could also damage your credit score and make it harder for you to be accepted by a lender who may view you as a risky borrower. Every time you apply for credit, a “credit application” search will be carried out and the enquiry will be added to your report.

Instead, use a “soft enquiry” to see how likely you are to get a loan before you apply – these kinds of checks will avoid any damage on your your credit report.

Also important to bear in mind are the costs and fees associated with purchasing your new property. You’ll need to have money saved to place a deposit, as well as the costs associated with raising a mortgage bond, transfer fees and attorney costs, then you must consider moving costs, home-owners’ insurance and municipal rates on your property. To ensure you can afford the purchase, it’s essential to calculate all your monthly expenses and those involved in buying your first home.

“As a general rule, your bond repayments, together with taxes and property insurance, shouldn’t exceed 25% to 30% of your gross income. Before applying for a mortgage bond, try to pay off other debt you may have (such as personal loans or credit card debt) to ensure that you have the best credit rating you can achieve”, says Cecilia Collyer, Regional Manager for Property.CoZa Financial Service.

Can a Home Loan Be Transferred from One Property to Another?

No, you cannot transfer your existing home loan from one property to another. If you have taken a home loan for one particular property, it is not possible to shift it to another property that you wish to buy but you can apply for a new home loan to be registered over the new property purchased.

If you do not want to repay the loan any further, you can transfer the debt to someone else. But that will happen only if you sell the property to a new buyer and the property is transferred out of your name with settlement of the existing home loan with the proceeds of sale.

Some alternative options would be:

1. If you have found another property that you want to buy, you can apply for a second home loan if you are eligible for the same. All you need to do is check your eligibility against the eligibility of the lender you wish to borrow from and see if you can qualify for a second home loan.
2. If you only wish to buy the second property you want, then you can sell off the first property that you took the loan for. With the amount received, you can settle your first home loan and take a new home loan for the other property that you wish to buy.
3. You can transfer your home loan to another lender who offers lower interest rates and better services. This is beneficial if you have a long-term remaining on your home loan and if the interest difference offered by the other lender is much lower than your current interest rate. You can then finish repaying your current home loan with ease and apply for the second home loan for the other property that you wish to buy.

Where do you apply for a home loan?

To apply for a home loan, look for a real estate agency that can take you through the whole process and one that has your best interests at heart. At Property.CoZa, our property professionals work closely with our Property.CoZa Financial Services (PFS) bond originators to provide a comprehensive service to buyers, from pre-qualifying a buyer before venturing into the real estate market to applying to several banks to secure the best rates when an offer has been accepted.  “Being able to play a small part in making home loan dreams come true, is a privilege we’ve been blessed with,” says Collyer.