Top Tips for Ensuring a Hassle-Free Home Loan Application Process in South Africa

Are you planning on buying a home? Securing a home loan is often the first step in making your dream home a reality. However, the process can seem daunting. To help you navigate through it smoothly, we've outlined the key steps involved in applying for a home loan.

  1. Determine how much you can afford: Before you start looking for a property, use an online bond calculator to estimate how much you can afford to repay each month. This will help you narrow down your search and avoid overextending yourself financially.
  2. Get pre-approved: Many banks and financial institutions offer pre-approval for home loans. This will give you a better idea of your budget and can help speed up the process of finding a suitable property.
  3. Find a home: Once you have pre-approval, start looking for a property that fits your budget and requirements. Attend house viewings to get a feel for the property and ensure it meets your needs.
  4. Make an offer and sign the contract of sale: Once you've found a property you're interested in, make an offer to the seller. If your offer is accepted, sign a contract of sale detailing the purchase price and conditions.
  5. Gather your documentation: When applying for a home loan, you'll need to provide proof of income, proof of identity, and a copy of the contract of sale. Gather these documents before applying to streamline the process.
  6. Choose the correct type of loan: There are several types of home loans available, including fixed-rate loans, variable-rate loans, and adjustable-rate mortgages. Choose the one that best suits your needs and budget.
  7. Compare rates and fees: Different lenders offer different interest rates and fees for home loans. Compare rates from various lenders to ensure you get the best deal possible.
  8. Submit your application: After gathering your documentation, submit your home loan application to the bank or financial institution. Include your personal and financial details, as well as your documentation.
  9. Wait for approval: The bank will assess your application and let you know if it has been approved. If approved, they will also provide you with the terms and conditions of the loan, including the interest rate and repayment period.
  10. Close the loan: Once your application is approved and the terms and conditions are agreed upon, the loan will be closed. The money will be transferred to the seller, and the property will be transferred into your name.

What is prequalification and why should I do it?

A pre-qualification is a basic review of your finances to determine if you would qualify for a mortgage. In general, a pre-qualification is based on unverified information you provide and a credit check.

A pre-qualification can show sellers that you're serious about buying a home and that you're likely to be able to follow through on a bid and close on their property.

All the documents you need

Here is a run-down of the documents you will need for a home loan application and additional documents required if you are buying through a trust. We also take a look at self-employed individuals.

Documents you require for all applications

  • A copy of your ID document
  • A copy of the offer to purchase containing both the seller and purchaser’s details
  • Proof of income. You will need to provide a salary slip (not older than two months), or a letter from your employer with a breakdown of your salary and deductions. If you are self-employed then you will need a letter from an accounting officer confirming your income, or a statement of your assets and liabilities
  • Six months’ worth of bank statements

Employed buyer

  • If you earn commission or overtime, provide the latest 6 months' statements. Statements should be verified and supplied by the bank - internet statements aren’t acceptable.
  • Copy of your ID document.
  • Copy of Marriage Certificate or ANC Contract (if applicable).
  • Application form and consent document.
  • Copy of the Purchase Agreement.

Self-employed buyer

  • Proof of income: Letter of Drawings from an Accountant (for all applicants if applicable).
  • Personal Assets & Liabilities Statement.
  • Latest 2 years' Annual Financial Statements.
  • Where Annual Financial Statements are older than 6 months to date, Current Management Accounts not older than 2 months signed by the applicant and accountant must be provided in addition to the Annual Financial Statements.
  • Copy of Marriage Certificate or ANC Contract.
  • Copy of Registration Documents or Trust Deed.
  • Application form and Consent Document
  • Copy of Purchase Agreement

Documents you require for a trust

  • A copy of the Trust Deed
  • A resolution by the trustees advising who may sign the home loan or pre-approval application and property purchasing documents

Where do I apply for a home loan?

For many people doing it themselves and using their current bank seems like the logical option - but shopping around for a home loan can actually get you a better home loan - and who doesn't want that?

You can use the MyProperty Home Loan service where our team of experts not only helps you get prequalified, they also help you get the best home loan possible.

Click here for more home loan advice

How to Avoid Home Loan Rejection: 4 Key Tips

  1. 1. Manage Debt and Income Ratio:

    • Assess your financial situation to ensure your income comfortably covers your existing debts.
    • Create a budget to track your income and spending, helping you maintain a healthy financial balance.
  2. 2. Maintain a Strong Repayment Track Record:

    • Avoid late payments on bills and loans to maintain a positive credit record.
    • Aim for a track record of timely payments for at least two years to enhance your creditworthiness.
  3. 3. Maintain Stable Employment:

    • Aim for a stable employment history spanning two to three years, as lenders prefer borrowers with consistent income.
    • Self-employed individuals should maintain meticulous records of income and expenses to demonstrate financial stability.
  4. 4. Maintain Sufficient Cash Reserves:

    • Lenders now expect borrowers to contribute a substantial cash deposit towards the property purchase price.
    • Ensure you have enough cash on hand for transaction costs like transfer duty, legal fees, and bond registration fees.
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