When it comes to securing a loan to build a new home, it is essential for the owner to provide a range of additional documents to the financial institution before the loan will be finalised or payments can be made to the builders.

According to The Property Factor’s Tess Rodrigues, anyone who wants to use bank finance to build a new property must provide copies of the plans, a copy of the tender and building contract, a certificate from the National Home Builders’ Registration Council (NHBRC) and a schedule of finishes along with a detailed list of specifications.

The other standard documents, such as an Offer to Purchase, identity documents of the owners and proof of income must also be supplied.

Should the bank approve the loan, the conveyancing attorneys then needs to have the mandatory FICA documents, a copy of the approved plans from the municipal authority, a building contract and a waiver of a lien from the builder, a copy of the builder’s insurance certificate and proof that the property has been enrolled with the NHBRC.

The owner of the property will usually be granted a bond based on the value of the land and the improvements to it, which normally includes the buildings. Thus if the bank grants an 80% bond it means that the owner will have to find the balance of 20% on transfer of the property and registration of the bond.

Rodrigues says that the first stage of building has to be financed by the owner and only after that will the bank allow progress payments to be made to the builder. The progress payment must also be authorised by a bank’s valuer who will assess the work done and its approximate value.

Rodrigues says that generally banks will make four or five progress payments to the builder but as soon as the first payment is made, the owner’s home loan account is debited and this amount attracts interest from the outset and must be paid monthly.

She warns that anyone considering building a home should be thoroughly familiar with the loan terms and conditions otherwise he or she might be stuck with an incomplete home that needs to be completed.

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Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

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In the world of finance, a bond is a debt security. It is an agreement to pay back the borrowed money, and interest is accrued. So, for all intents and purposes, a bond is very similar to a loan. They can provide a borrower with external funds which can be used for long-term investments. Bonds are generally issued by credit institutions, and the most common process is through underwriting. Underwriting is simply the process a large financial institution goes through, to assess the eligibility of a consumer to receive their services.

The type of bond or loan you apply for determines the time required for processing and completion, and different types of loans require different kinds of documentation. Paperwork for bond issues and loans can be overwhelming, but there are basic documents required by all lenders, prior to processing an application.

Verification of your income is a major priority. To do that, you will need earnings statements like your W-2 forms, pay stubs and tax returns, for at least two years. For those who are self-employed, profit and loss statements and tax returns can be used. If you have additional income, such as social security, bonuses, commissions, interest and so on, be sure to have that documentation available as well.

Bank account and savings account numbers, along with those statements, should be provided. Also have information available for all savings bonds, stocks and investments, as well as copies of titles to any vehicles that are paid in full. Supplying a copy of a ratified purchase contract for the property in question, along with a copy of the cancelled check used for a down payment, will also be required.

You will want records of your debts, as well. Credit card bills, car loans, furniture loans, student loans, and other installment loans should be made available, along with creditor contact information. Also, if you have paid child support or alimony, make those records available, as well.

Verify your credit history by supplying the lender with canceled checks for rent, utilities and other recurring commitments. This shows a payment history, as well as the amount of your revolving debt.

When all the proper documentation has been received, it goes to a processor. Their job is to verify and validate all the information. You should anticipate that verification requests will be sent to your employers, mortgage holder or landlord, and lending institutions.

For the most part, securing a loan or bond will depend on your previous financial habits, in other words, your credit report. Before they step out on a limb and extend credit, lenders want to know what the risk factor is, in getting their money back. Make sure you know what is in your credit report, prior to applying for a loan or bond. If you find an error, take the needed steps to correct it before you apply. On average, almost 50% of all credit reports have errors that are noteworthy enough to cause a loan or bond denial.

Once all the information is collected and verified, the file is sent to the underwriter.

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