Things to Consider Before Applying for a Bond
Getting a home loan can be a challenging process. Here are some valuable tips for acquiring bond approval so you can secure your dream home.
Find out what you can afford – consider your financial ability to service the home loan being applied for on a continuous basis. Your affordability can determine whether or not you are going to be able to manage your monthly home loan repayments. In order to determine your affordability, one would take your current income and expenses into consideration, then verify this information by referencing to your bank statements and other supporting documentation. As much as you may be tempted to stretch yourself in order to afford more on a home loan, it is important to be prudent and honest when presenting this information. Financial situations can change and being able to comfortably manage your obligations now and over the long-term, is always a wiser decision. Use this affordability calculator to help.
Get pre-qualified – One way to ensure that the loan you apply for will be granted is to get a pre-qualification. The Pre‑approval Certificate gives you a good idea of what you can spend and where you should look. And it curbs the temptation to take on properties out of your reach.
On top of this, it gives you the confidence to make a firm offer to purchase (OTP), and sellers are more likely to accept your offer because you’ll have the funds to back it. Read more about this here.
Make sure you have a clean credit record or repair a bad credit record. Your credit record is the most critical factor when attempting to secure home loan approval. Find out more on this: https://www.betterbond.co.za/learn/how-to-keep-a-good-credit-score
Make sure you have the correct paperwork. To assist the bank in determining its risk, you will be required to provide personal information such as bank statements, salary slips, a statement of assets and liabilities, a statement of your monthly expenses and information on your employment and credit history, including whether you have ever been insolvent.
If you use a bond originator, they will manage the whole application process for you, from completing application forms and collating supporting documents to writing individual loan motivations and submitting applications to multiple banks. This means that you don’t have to spend time taking all your paperwork from bank to bank to secure a home loan.
It is preferable to have a deposit. The larger the deposit then better. There are significant benefits to saving towards a down payment on the property your applying to finance. It’s not uncommon for lenders to offer better rates to clients who put up bigger deposits as the loan will appear less risky in the eyes of the lender. Paying a deposit means that you will also be financing a lower amount. The combination of a better rate and lower bond amount will put you in a better position from the beginning as you save on interest and capital repayments over the lifetime of your loan. Having said this, it is still possible to apply for a home loan with zero deposit.
Compare home loans first. Home buyers looking for the best deal on home loans should make use of a home loan comparison service that specialises in shopping around between banks and negotiating the best deal for the customer for free. There are resources on the Betterbond website that can help you with that: https://www.betterbond.co.za/
Get the best interest rate.
The lower the bank’s risk in lending funds to a particular borrower, the better the rate it will offer that individual. The size of the bond you apply for, your credit history and the investment value of the property you intend to buy also affect the rate you will be offered. Shop around and negotiate with various banks to ensure you get the best package. You could use the service of a mortgage/bond originator as they can help you acquire multiple home loan quotes. Then you get to choose the best deal.
