A guide to home buying process for the self-employed

THERE is a misconception that it is near impossible for entrepreneurs or people who are self-employed to enter the property market, due to the banks’ very strict lending criteria.

Securing home finance if you are self-employed is not impossible, says Careen McKinon, provincial sales manager at bond originator ooba, who believes it is important for this segment to be represented in the property market.

“The application process requires a little bit more effort than that of someone who is not self-employed. Banks generally see self-employed people as high risk. The lack of a guaranteed income from a single source can make banks anxious about financing a home for you,” says McKinon.

ooba reported that 10 percent of applications received in the third quarter of 2015 were self-employed applicants, compared to 11 percent in the second quarter of 2015 and 9 percent in the third quarter of 2014. This is about half of the 20 percent level experienced in 2007, indicating that selfemployed applicants are less confident about their ability to qualify for home finance.

But, says McKinon, if you do your homework, as with any other bond application, and get expert assistance from a bond originator to get you prequalified for a home loan, you will be better prepared to enter the property market.

“This instantly takes the hassle out of this process. If you opt to submit your application on your own, you run the risk of your application being denied, which can negatively affect your credit record.”

So how can you increase the chances of your home loan being approved? The first step is to ensure that all your paperwork is in order. If you are selfemployed, McKinon suggests that you submit the following when applying for a home-loan:

● Comparative financials covering a trading or working period from the last two years.

● A letter from your auditor or accountant confirming your personal income.

● If your financials are more than six months old, you will need up- to- date signed management accounts.

● Cash flow forecast for the next 12 months.

● Personal statement of assets and liabilities.

● Personal and business bank statements for 6 to 12 months.

● Your latest IT34, which is confirmation from Sars that your tax affairs are in order.

● Company, CC or trust statutory documents.

● Identity documents for all the directors, members or

‘The application

trustees.

“Although this list seems rather daunting, it is all the more reason to use an expert to guide you through the process, as this will get you one step closer to acquiring a home loan. Have your tax affairs and finances in order and up to date. It will help to separate your personal and business expenses,” says McKinon.

She says the home loan approval process for selfemployed applicants generally takes longer than for applicants who are not self-employed.

“Maintain a good credit record and have all the required paperwork, as this will assist your home loan application being approved faster,” says McKinon.