Self-employed and applying for a bond? Help is at hand.
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For self-employed people, from sole proprietors to owners of small companies, getting a home loan can seem impossible. Correspondingly, owning the home of your dreams can seem like a pipe dream. The good news is that with the right preparation and the right people on your team, there's no reason why self-employment and homeownership can't both be yours. By following a few simple steps and preparing upfront, you can avoid disappointment once you sign on the dotted line to apply for your home loan.
Save up a deposit
As is the case with any home loan applicant, the higher the amount you have saved for a deposit, the greater your chances of having a home loan approved will be. It makes perfect sense from the bank's point of view, because having savings shows that you are financially responsible. A self-employed home loan applicant with no deposit who wants to buy a home valued at R2 000 000 is a much higher risk than another self-employed applicant who wants to buy a home for R2 000 000 and has R400 000 to put down as a deposit. Proof of financial responsibility and your ability to save will place you in good stead in the eyes of the banks.
Make sure your finances and paperwork are in order
Part of the home loan application process is making sure that your personal and business expenses are separated. Also, your financial records will need to show that you can afford the property you hope to buy. Topping the list of things the banks will look for in your financial statements is regular, consistent income. They will also be checking what other expenses you already have, both as a business and as an individual.
From a paperwork perspective, you'll need to have comparative financial statements for the last two years, and if your most recent financials are more than six months old, you'll also need signed management accounts. Your bond originator will help you ensure that you have all the correct paperwork together before approaching the banks on your behalf.
Take a look at your credit score
Your credit score is a number that tells the bank how much of a risk you are. It will be a three-digit number, and the higher it is, the better your prospects of getting a loan and a great interest rate. According to the banks' current requirements, your credit score must be at least 620 in order to possibly qualify to be granted a bond. Thanks to ooba's Home Loans Bond Indicator, it's easy to find out what your credit score is. This handy online tool is free, comes with no obligations and will give you a realistic indication of the price bracket in which you should be house hunting. A credit score is calculated by an analysis of the credit transactions that you have entered into and how well you have proved to manage your debt.
Apply through a bond originator
Applying for a home loan in 2020 without using a bond originator - particularly as a self-employed person - makes no sense at all. For starters, the service is free, and ooba will ensure that you get the best possible interest rate. In addition, it means you only need to fill out one set of paperwork, which will form the basis of your application to all the banks. Ooba's consultants have good, long-standing relationships with the banks, and can negotiate on their clients' behalf. In the case of a self-employed applicant, this assistance and the helpful advice that you will be offered can be invaluable.
Another great reason to use a bond originator is the fact that every bank has slightly different offerings, and these change frequently. For example, certain banks will currently offer home loans of up to 105% for first-time homeowners subject to certain price limits. For self-employed applicants, some banks will only assist customers who currently bank with them, and who have a 20% deposit saved up. By using a bond originator who will approach all the banks on your behalf as a self-employed person, you give yourself the best chance of being accepted and getting a favourable interest rate.
If you're self-employed, buying a home that comes with a home office can make a huge difference in your life. Don't fall into the trap of believing the common misconception that getting a home loan is out of your reach. To find the perfect home in any corner of South Africa, browse the listings on the Jawitz Properties website, and to arrange the finance, enlist the help of our trusted bond originators.
Author: Jawitz Properties
