First Time Home Buyer Loans

You have found the house that you always wanted and all that is left is to get a home loan approved to finance your house. If this is the first time you are buying a house, then you are a first time home buyer.

Your first installment on your home loan will be more or less the same as a rental payment on a lease contract. The only thing that will make a difference here is the transfer duties that you will have to pay to the tax receiver of revenue for buying the property and transferring it to your name. Sometimes this is already included in your bond.

When you apply for a first time home loan it is important to remember that there are a number of special criteria which you’ll need to fulfill if you wish to get your bond approved.

The first thing to take in consideration is the amount of bond you wish to apply for. You will usually qualify for 25% – 30% of your annual income if you have a good credit record. So if you wish to apply jointly for a home loan then you will qualify for a bigger amount.

The Loan to Value Ratio (LTV)

The minimum amount that the banks in South Africa usually lend approve to sa home loan applicants usually differ from R100 000 to R150 000.

When you apply for your home loan, the banks will do a Loan to Value Ratio to work out how much you qualify for and the interest rate that you will have on your bond.

The LTV is a lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage. Typically, assessments with high LTV ratios are generally seen as higher risk and, therefore, if the mortgage is accepted, the loan will generally cost the borrower more to borrow or he or she will need to purchase mortgage insurance.

So for example: John wants to buy a property for R1 million and want to apply for home loan amount of R900 000 because he already has R100 000 for a deposit. His LTV will be 90% which means that it will be a risk and he will pay a high interest.

What are required from you when applying for a mortgage?

The first thing you will need to do is to apply for your home loan and then send your bond originator or bank the correct documents. This is the basic documents that they will require from you:

• A copy of your ID
• A copy of your latest salary slip
• A copy of an offer to purchase
• Your physical address
• Your work employer details – name, tel nr, address, date started
• 3 Months bank statements

The bank will then do a credit check on you to make sure that you are able to pay your monthly installment. So if you have a good credit record, your chances in getting a loan approved will be much bigger.