Preparation key to success

GOOD preparation is the key to success in most endeavours – and home loan applications are no exception, says Shaun Rademeyer, CEO of Better Life Home Loans.

You can make the process easier and faster if you have the information and documents ready:

Your credit record. You are entitled to a free credit report every year and it is a good idea to get yours and check it before you think of applying for a home loan, because you may need time to clean it up. You need to remember not to apply for any new credit until your home loan application is approved and your new home is transferred into your name.

Proof of income. You should be prepared with payslips, copies of work contracts and other documents that can verify your income from employment for the past two to three years. If you are self-employed, you will need personal and business bank statements and financial statements. In both cases you should bring your latest tax returns and assessments and if you have any other sources of income, you must also declare them.

A list of your debt commitments and living expenses. What lenders want to know is if you will have enough of your take-home income left after monthly payments to be able to afford the mortgage instalment. Debts and expenses to put on the list include student loans, car loans, credit card and store card balances, rent, school fees, utility costs, medical aid contributions, insurance premiums and monthly transport and food costs.

Proof of cash reserves and other assets. Your mortgage originator will need to know how much cash you have available for a deposit on your chosen property and the additional costs of a home purchase.

The bigger your deposit, the more likely you are to qualify for the loan.

Use of property. This will probably not be an issue if you are planning to use the property as your primary residence, but if you are buying it in order to rent it out, you should provide a copy of the current lease, or an estimate from a recognised managing agency of the rental income you are likely to receive once the property is let. The banks use different credit criteria when assessing loan applications for secondary properties – and those for vacant land on which the purchaser intends to build or develop.

Your originator needs to know what your plans are.