It used to be that buyers looking to purchase property could secure an actual pre-approval from banks or lenders for a homeloan, but with the advent of the recently revised National Credit Act (NCA) those days are gone. That said, it is still possible for a potential purchaser to get pre-qualified for a homeloan. However, buyers must understand this is a service, as opposed to a product, offered by bond originators to assist them in ascertaining if the buyer can realistically afford the homeloan they’re applying for. While it is not a guarantee of approval – the final decision rests with the bank – pre-qualification does have a valuable place in the home buying process.
Getting pre-qualified for a homeloan is free and can help you determine the price range you can afford to explore before you even go looking at potential properties. This helps you avoid wasting time and effort looking at properties you have no hope of securing a homeloan for, as well as the inevitable disappointment if you’ve set your heart on a home out of your price range. On a positive note, pre-qualification is an excellent guide for establishing realistic expectations as far as your purchasing power goes.
It’s Quick and Easy
The process of getting pre-qualified for a homeloan is quick and relatively simple. Under the revised NCA, it typically takes into account your disposable income, either individual or joint depending on your marital status, and your credit score. The latter is with your consent, naturally, but considering the bank or lender is going to take your credit score into account when you do make formal application for a homeloan, you may as well know now exactly where you stand in this respect. The other bonus of establishing your credit score at this point is that if there are any issues in this regard, issues that could potentially hinder your homeloan application, you can take steps to resolve these issues sooner rather than later. Pre-qualification can also give you an indication of whether you need to save for a deposit or not.
To complete the pre-qualification process, you will require the following paperwork: your identity document; your most recent payslip; and your last three month’s bank statements. Your disposable income is calculated by deducting tax, UIF and any company pension payments from your gross income. This leaves your net income and once your total monthly household and utility expenses and any credit, vehicle or other loan repayments are deducted from this amount, what remains is your disposable income. Most banks and lenders will calculate the maximum monthly instalment as 30% of your gross income.
Another advantage to using a bond originator to get pre-qualified for a homeloan is that the bond originator will determine your chances of firstly securing a homeloan, secondly establishing the amount you’ll qualify for on your current income.
What happens after you get pre-qualified for a homeloan?
Once the pre-qualification process is complete, you will receive a certification stating the homeloan amount you are deemed capable of affording. Note that while this certification is only valid for a limited period it is still a valuable first step onto the property ladder and gives you the leverage to confidently negotiate with a seller and put in an offer to purchase. Getting pre-qualified for a homeloan indicates to the estate agent and seller alike that you are serious about the home buying process. Furthermore, it can improve the likelihood of your formal bond application being approved. And even speed up the application process, particularly as you’ll have dealt with most of the obvious hurdles by completing the pre-qualification process.
Pre-qualification is an excellent tool to aid the potential purchaser in navigating the home buying process. It empowers you to enter the real estate market with your eyes wide open. If you are planning to buy property, take the hassle and uncertainty out of the process by getting pre-qualified for a homeloan. For assistance, contact Homeloan Junction.