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INTRODUCTION:
A first-time home buyer is someone, looking to purchase their first property or home. But before you’re able to purchase your first home you’ll need to secure a home loan.
In many cases a monthly installment on a home loan is more or less the same as a rental payment on a lease contract. The only exception is the transfer duty fees which is payable upon registration of your bond “ although this may even be included in your bond amount.
So, you’ve decided to purchase your first home and all you need now is the finance.
You’ll want to remember that as a first time home buyer there are a number of special criteria which you’ll need to fulfill if you wish to qualify for home loan finance.
One of the most important factors to consider is what size bond you can qualify for.
Often this is about 25-30% of your joint salary, meaning that if you and your partner apply for the home loan jointly you could be approved for a larger loan.
KEY FACTORS for your home loan application:
The minimum home loan amounts offered by most banks in South Africa usually vary between R100 000 and R150 000.
Upon the application for your home loan the bank will consider the Loan-to-Value ratio (LTV) , which is the ratio between the home loan amount you’re applying for and the value of your property.
For example, Mrs. A. has R100 000 available as a deposit for a property which is valued at R500 000, she therefore only needs to apply for a R400 000 loan, the LTV is therefore 80%.
The reason this is so important when applying for a home loan is because the LTV percentage forms part of the interest rate calculation on your loan amount.
The lower the LTV percentage – the lower the interest rate will be on your mortgage.
Remember that as a first time home buyer you might not have a deposit available for your new home, therefore many banks provide LTV percentages of up to 108%. Meaning you can get a loan which covers the full value of the home and all costs included.
The maximum loan term offered by all banks is twenty years, and some banks require a life policy to be ceded to them. It is important to clarify this with your bank immediately.
REQUIREMENTS:
The general requirements of applying for your first home loan are the basic details of your monthly salary, your credit history and the offer to purchase.
The following criteria will need to be passed to qualify for a home loan
1) You’ll have to be 21 years or older
2) Six months permanently employed or at least self-employed for two years
3) The minimum salary requirements can vary between R8,000 and R10,000/pm joint or single income.
4) You’ll need to have a credit clear history, i.e no judgments or defaults.
5) Some banks may require SA citizenship.
Make sure you have all the following documents available.
1) Copy of ID,
2) If you’re full-time employed, 3 months bank statements.
3) Offer to purchase, which is the written agreement between the seller and the buyer on the purchase price of the property.
Sectional Titles must submit most recent body corporation financials.
4) Most recent payslip, although commission earners will need to submit 6months payslips.
5) If you’re a self employed business owner,
- 6 months business accounts statements
- 6 months personal bank statements
- a letter from auditor or accountant stating monthly income.
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