Are you a first time applicant for a home loan? There is a reason to smile because the financial well-being of the South African industries is showing signs of improving.
As such, quite a number of financial institutions have lowered their loan requirements and are now giving more finance to home buyers. The change in the financial well-being has also caused banks to give 100% finance to people who are intending to get home loans. In as much as banks have relaxed the requirements, quire a number of South Africans are finding it hard to successfully apply for a loan even as an individual or with a partner.
For one to have their applications approved, they need to meet all the necessary requirements wanted for one to get that particular home loan. Chief among the reasons why most South Africans don’t qualify for home loans is their low income which do not meet the expected figure that is needed when one is applying for a home loan.
Below are the requirements:
- Affordability is the main criterion which lenders use to evaluate home loan applications.
- Applicant’s Income. The higher it is the more affordable the loan will be.
- Applicant’s monthly expenses. The expenditure includes living expenses and debt payments as well.
According to a number of financial institutions, most locals have a low affordability due to their high living costs and high debt levels. When someone has a high monthly spending rate, chances are high that they don’t have enough to repay the loan. The other major factor for the fairly low home loan application approval rate is the low creditworthiness of many applicants.
Home loan applicants who earn high and spend less easily qualify for the best home loans available in the South African market. For instance, they can obtain 100% finance to buy a property. In order for a bank to assess the affordability of a home loan for an applicant, it uses financial information about the person available from the credit bureaus. The lender looks into the applicant’s income, living expenses and existing debt.
When is applying for a home loan there are expected to contribute to the purchase of the property by paying a certain chunk of the sales price out of their pocket. This sum is called deposit. It controls the loan-to-value ratio, which expresses the loan amount as a percentage of the property’s sale price. The larger the deposit is the lower this ratio is and vice versa.
Overall, when you have more money to buy a house, you will have less to borrow. This will give you higher chances of home loan approval and help you save on interest payments. Banks can even offer lower interest rate to applicants who are able to place a larger deposit. That is why it makes sense for you to save for a deposit to use towards the purchase of a house.