For most of us, the financial and economic mayhem caused by the 2009 global financial crisis is little more than a distant, mildly painful memory. However, given that the crisis had its roots in the unethical granting of credit by some larger international financial institutions, one of the lingering consequences of the so-called credit crisis is that banks are now a lot more diligent when it comes to checking whether people should be receiving credit or loans, and if so, how much credit they should be getting.
While these more stringent risk assessment processes have added to the administration involved in applying for a home loan, they haven’t, as some people seem to believe, made it impossible for certain individuals to qualify for a bond.
In fact, the opposite is true. The one main lesson that banks learned from the credit crunch was the importance and value of a good credit book. And, as such, most banks are very happy to grant loans to people who are able to demonstrate that they can afford to make their repayments, and have the solid credit history and reliable income to back up that commitment.
With that in mind, it’s worth arming yourself with as much knowledge, information and evidence as possible before you approach your bank for a loan to buy that dream home. Here’s a quick guide to maximising your potential for home loan success, no matter who you are or what type of work you do:
1. Know what options are available
When it comes to home loans, there are essentially three main options available. The ordinary or traditional home loan is your typical finance facility that you can use to buy an established or newly built residential property. Secondly, there’s the building loan, which, as the name implies, gives you the funding you need to construct your new home, or make improvements or extensions to your existing home. Nedbank also offers a third option, called the HomeVision home loan. This innovative home finance solution lets qualifying applicants register a loan that is higher than the actual amount needed to buy or build the house. The excess amount isn’t immediately given to the applicant, but it is available when the property value increases in the future and their affordability levels increase.
2. Who can apply for what?
There’s a common misperception that self-employed people and contract workers can’t get home loans. This simply isn’t true. The banks assess every home loan application on its individual merits, so whatever type of work you do, the most important thing you need to do is demonstrate to your bank that you have a steady and reliable source of income sufficient to repay your loan.
When assessing your application, the bank will look at the following:
- your monthly income and how long you have been employed
- your typical monthly expenses and how much you are left with to repay your loan
- your credit history – whether you have proven yourself to be disciplined in repaying your debts in the past
- the value of the property and whether the asking price is a fair reflection of that value.
Irrespective of whether you’re employed full-time, self-employed or a long-term contract worker, you can maximise your chances of a positive outcome by showing that you are serious and committed to repaying your home loan. The best way to do that is by putting down as much of a deposit as you can afford.
While some home loans, like those granted to first-time buyers, may not require a deposit, others do. Nedbank does not necessarily request a large deposit towards the loan; instead the bank values the actual loan at a much higher price.
But whatever type of home loan you’re applying for, saving up the money for a deposit is still arguably one of the best ways to maximise your chance of getting the funding you need from your bank.
3. Where to apply
While every financial institution may have a few differences in their application processes, for the most part, your application options will include:
- Online – Nedbank offers a secure and paperless online self-service application. It includes an instant credit and affordability check, so that you immediately know what sort of price range you should be looking in. Once you submit your application, you will be informed of the decision within a few hours.
- At a branch – Most banks offer in-branch applications, where a sales consultant will help you through the entire home loan application process.
- Home loan consultant – Nedbank also offers a service where a home loan consultant will come to you, at home or at the office, and guide you through the application.
As with so much in life, when it comes to succeeding in getting the finance you need to buy your home, knowledge is power. By following these guidelines, you will greatly enhance your prospects for a positive outcome on your home loan application. And remember, the banks aren’t looking for reasons to deny your home loan, they are looking for good reasons to grant it. So, be sure to give them as many of those as you can.