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How to Qualify for a Home Loan To Buy a House

Loans • by Creditgenie • 19 October 2017

Applying for a home loan has become more difficult since the National Credit Act was implemented and the start of the global economic crisis. To apply for a home loan, if you are a first-time buyer, your bank will require that you meet the following criteria:

  • Have a stable steady income. You will need to provide proof of this in the form of a payslip or an audited financial statement.
  • Qualify for the home loan in terms of the bank’s affordability criteria and be able to afford the monthly home loan payments
  • Have a clean credit record. If you have any default judgments or listings, the bank will turn down your home loan application
  • The bank may apply additional conditions at its discretion.

    Whilst the home loan application sector is a difficult one to navigate, with these helpful pointers and advice, applying for a home loan will become exponentially easier:

Stable and Steady Income

If you are employed and receive a payslip, the banks will feel more comfortable in accepting your home loan application. People who are self-employed will need to provide the bank with a great deal more information to qualify for a home loan. The bank will require you to provide them with your latest set of audited financial statements as well as a 6-month bank statement - the bank wants to satisfy itself that you are able to generate an income to cover your home loan payments. If your business is still new or not generating the desired level of income, it would be prudent to hold off on applying for a loan until you and the business have built up more of a track record.

Banks Affordability Criteria

You have a steady income, but based on the bank's affordability criteria you don't qualify for a small, personal or home loan. You could always consider applying to another bank for a home loan as various South African Banks have slightly differing affordability criteria, however, this is unlikely as most banks have the same core requirements for applying for a loan.

You need to identify what the problem areas are in your home loan application and address these issues. Often home loan applicants are declined because their debt levels are too high and a significant portion of their income is used to service debt. It is important to reduce your debt levels to acceptable levels before reapplying for a home loan. You can do this by cutting your expenses and paying off more debt. Always pay off the most expensive debt first and work through your debts systematically. As you pay off more debt, increase you repayments on other debt items until your debt levels become more manageable.

Another problem area causing your home loan application to be declined is that your income is too low to service the home loan. Try shopping around for a more affordable property that you are able to finance or save towards a bigger deposit, making the property more affordable.

 Clean Credit Record

This is where most people fall short with their home loan applications. Before approaching your bank for a home loan, always check out your credit profile before applying. You can do this at your local Credit Bureau, TransUnion or Experian - they may charge you for the credit report, but this is well worth the expense.

If your credit record has a few blemishes, you may need to clean it up before applying for a home loan. If you are listed as a slow payer by a creditor, you should get your payments up to date ASAP and conduct your account in a more responsible manner. Thereafter, approach the creditor and ask them to remove the slow payer status. Applying for any small, personal or home loan is difficult without a clean credit record, so this point is of vital importance.

If a creditor has made a default judgment against you, the situation becomes trickier. You will need to approach the creditor before paying the outstanding amount and make them an offer to pay off the debt in full in exchange for having the judgment rescinded, improving your chances of having your home loan application approved.

If in some cases you have paid the entire debt, but your credit is still reflected negatively, you should obtain a letter from the creditor stating that the debt has been paid in full. It is always best however to try and get the listings removed as this makes the home loan application process simpler.

With these tips in mind, applying for a home loan will be a simpler, more manageable process! If you feel prepared, start your application process now and see if you qualify for a small personal loan.

Check out more of our personal finance articles here.