What you should to know before applying for a Home Loan. What you need to earn and how your interest rate is calculated. How your credit score affects your application.
The Minimum Income to Qualify for a Home Loan
Several South African banks confirm that there is no minimum income to qualify for a bond. Banks use your income to determine the size of the bond that you do qualify for. The general rule is that banks will offer you a bond equivalent to the repayment of (33%) of your monthly income towards monthly installments. The installments will be calculated based of the interest rate you have been offered by the bank.
This is based on the “repo rate” or prime interest rate, which is set by the SA Reserve Bank. The prime rate is 10% as at October 2019, your interest might be more as the banks will probably charge you a slightly higher rate.
How does your Credit Rating affect your Home Loan Application
Every South African citizen has a credit record whether good or bad and all your credit transactions are documented. Your bank will need your permission to access these records. You can also obtain these details yourself before submitting them to your bank to get an idea of whether you will be granted a bond.
You are entitled to a free copy of your credit record once a year. Your credit history can be a good thing as banks also decide which interest rate to give you based on your credit score and if it is good you are more likely to get better offers from different institutions.
Supporting Documents For Homeloan Applications:
- A copy of your ID document
- A copy of the offer containing seller's & purchaser's details
- Proof of income
- Payslip (not older than 2 months) or a letter from your employer
- If you are self-employed then you will need a letter from an accounting officer confirming your income, or a statement of assets and liabilities
- 6 months bank statements
Companies / Close Corporations / Trusts:
- Copy of financial statements. You may be required to produce a full set of financials e.g. balance sheet, income statements, which must be signed by the auditor.
- Details of all the directors and members.
- Founding statement of the close corporation, Close corporation certificate, Company certificate
- A copy of the Trust Deed, Memorandum and Articles of Association
- A resolution by the directors, members of companies, close corporations or trustees advising who may sign the home loan application or pre-approval for the purchase of the property.