A guide to home buying for the self-employed

The misconception exists that it is near impossible for entrepreneurs, or individuals who work for themselves, to enter the property market, due to the banks’ very strict lending criteria. However, securing home finance if you are self-employed is not impossible.


This is the view of Careen McKinon, Provincial Sales Manager from ooba, South Africa’s largest bond originator, who says that it is important for this segment to be represented in the property market.


“The application process requires a little bit more effort than that of someone who is not self-employed. Banks generally see self-employed individuals as high risk. The lack of a guaranteed income from a single source can make banks anxious about financing a home for you,” says McKinon.


ooba reported that 10% of applications received in Q3 2015 consisted of self-employed applicants, compared to 11% in Q2 2015 and 9% in Q3 2014. This is about half of the 20% level experienced in 2007, indicating that self-employed applicants are generally less confident about their ability to qualify for home finance.


But, says McKinon, if you do your homework, as with any other bond application, and seek the expert assistance of a bond originator like ooba to get you prequalified for a home loan, you will be better prepared to enter the property market.


“This instantly takes the hassle out of this process. If you opt to submit your application on your own, you run the risk of your application being denied which can negatively impact your credit record.”


So how can you increase the chances of your home loan being approved? The first step is to ensure that all your paperwork is in order. If you are self-employed, McKinon suggests that you submit the following when applying for a home-loan:

  1. Comparative financials covering a trading or working period from the last two years
  2. Letter from your auditor confirming personal income
  3. If your financials are more than six months old, you will need up-to-date signed management accounts
  4. Cash flow forecast for the next 12 months
  5. Personal statement of assets and liabilities
  6. Personal and business bank statements (6 to 12 months, depending on the banks’ requirements)
  7. Latest IT34 , which is confirmation from SARS that your tax affairs are in order
  8. Company, CC or Trust statutory documents
  9. ID documents for all the directors, members or trustees.


Although this list seems rather daunting, it is all the more reason to use an expert to guide you through the process, as this will get you one step closer to acquiring a home loan. “It is imperative to have your tax affairs and finances in order and up to date.  In addition, it will help to separate your personal and business expenses,” says McKinon.


She says that self-employed applicants generally undergo a longer home loan approval process than individuals who are not self-employed.


“Maintain a good credit record and ensure you have all the required paperwork, as this will increase your chances of your home loan application being approved faster,” concludes McKinon.

Broswe ooba's range of home loan calculators and other resources available to help you determine the potential cost of your home loan when planning and budgeting

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