How to Apply for a Home Loan in 6 Easy Steps: Complete Guide

Article summary

• Applying for a home loan doesn’t have to be complicated.
• This guide walks you through the entire process from checking what you can afford to getting final approval.
• By applying through ooba Home Loans, you can submit to multiple banks simultaneously, compare offers, and secure the best possible interest rate and terms for your home loan.

So you’ve decided to make your dream of home ownership a reality? As you may be aware, the home loan is the means by which you fund a home purchase.

So how do you go about applying for a home loan? We sum up the process for you.

Funding Your Home Purchase

Purchasing a home is one of the most exciting steps you’ll take in life, but first, you need to secure funding. The standard way to do this is by applying for a home loan (also called a mortgage or bond) from a bank.

Most homebuyers don’t realise that competition between banks not only increases your likelihood of getting approved for a home loan but also of securing better terms that suit your specific financial situation.

This comprehensive guide will take you through the process of applying for a home loan so you can navigate the journey with confidence and get the best possible deal.

How to apply for a home loan in 6 steps

1. Determine what you can afford.
2. Check your credit record.
3. Find a property you like.
4. Make an “Offer to Purchase”.
5. Organise the documents required.
6. Use a home loan comparison service

1. Get pre-approved

Before you start house-hunting, you need to know what you can realistically afford. Preapproval is the critical first step in the home loan application process.

Here’s how to get pre-approved:

– Contact an expert at ooba Home Loans for a personalised assessment.
– Or use our free online preapproval tool, the Bond Indicator.
– Provide basic financial information to determine your purchasing power.
– Get a solid estimate of what price range you should be looking in.

During preapproval, we’ll assess your credit record – the most important factor banks consider when evaluating your application. Our preapproval certificate serves as proof to sellers and banks that you can afford the home loan, significantly improving your chances of a successful application.

2. Check your credit record

• Your credit record is the most important factor when applying for a home loan.
• You need to know if your credit record is high enough. If not, you should take time to improve your credit record before applying for a home loan.
• You should have a credit record of at least 610 if you want your application to succeed.
• You can find out your credit record by getting prequalified using our Bond Indicator.

3. Find a property you like

Once you know what you can afford, it’s time to find a property that meets your requirements:

• Consider working with a reputable estate agent who understands your needs
• Research potential neighbourhoods thoroughly (crime rates, amenities, schools)
• Attend in-person viewings rather than relying solely on photographs
• Consider property inspections to identify any potential issues
• Evaluate proximity to work, schools, and essential services

Take your time with this step – rushing into a purchase decision could lead to regrets later. Make a list of non-negotiable features and nice-to-haves to guide your search.

4. Make an “Offer to Purchase”

• Once you’ve found the property you want, you need to agree on terms with the seller.
• To do this, you make an Offer to Purchase; a document which contains the terms and conditions for the sale to go ahead.
• Both seller and buyer will want to name their terms and conditions.
• Terms and conditions that serve the interests of the buyer include requiring a home inspection to be conducted and for the seller to fix patent defects.
• You can only apply for a home loan once you and the seller have signed the Offer to Purchase.

Important clauses to include in your OTP:

• Subject to home loan approval (suspensive condition)
• Home inspection requirement to identify defects
• Occupational rent terms, if applicable
• Fixtures and fittings included in the sale
• Occupation date

Be aware of the 72-hour clause:

This clause allows the seller to continue marketing the property. If they receive a better offer, they must give you 72 hours to fulfill your obligations before accepting the new offer. Most sellers include this clause and typically won’t remove it from the contract.

5. Organise the documents

To streamline your home loan application, gather these essential documents:

For all applicants:

• Completed and signed application form
• Copy of ID document/passport
• Proof of residence (not older than 3 months)
• Signed Offer to Purchase with both buyer and seller details
• Six months’ bank statements
• Marriage certificate (if applicable)

For salaried employees:

• Recent salary slip (not older than 2 months)
• Letter from employer confirming employment and salary

For self-employed individuals:

• Letter from accounting officer confirming income
• 6-12 months of business bank statements
• Statement of assets and liabilities
• Latest financial statements
• Personal and business tax clearance certificates

6. Use a home loan comparison service

• Don’t just apply to one bank; apply to multiple banks so you can see which ones offer the best deals.
• You can do this with the help of a home loan comparison service such as ooba Home Loans. We have relationships with all the major banks and will submit your application to them on your behalf.
• Submitting to multiple banks will allow you to compare the packages they offer and choose the one with the most favourable interest rates.

Paying your Deposit and finalising the Deal

Most home loans require a deposit of at least 10% of the purchase price, though this can vary between 5-20% depending on your financial situation and the bank’s policies.

Important deposit considerations:

• Higher deposits typically result in lower interest rates
• A substantial deposit improves your chances of approval
• Aim to save at least 10% of your target property price
• Factor in additional costs beyond the deposit

100% home loans (no deposit options):

Many banks now offer 100% home loans that remove the need for a deposit. However, these typically come with higher interest rates. Your best chance of obtaining a 100% home loan is to apply to multiple banks through ooba Home Loans.

Once your home loan is approved and you’ve accepted an offer, you’ll need to:

1. Pay the deposit to the transferring attorney
2. Sign the home loan agreement
3. Pay the bond registration and transfer costs
4. Wait for the property to be transferred into your name

Additional Costs to Budget For

When applying for a home loan, remember that the purchase price and deposit aren’t your only expenses:

Once-Off Costs:

• Bond registration costs: Approximately 1.5-2% of loan amount
• Transfer duties: Based on property value (exempt under R1 million)
• Transfer costs: Legal fees for property transfer
• Moving expenses: Transport, packing materials, professional movers
• Initial repairs/renovations: Any immediate fixes needed

Use our Transfer Cost Calculator to determine what you’re like to pay on transfer, bond registration and transfer duty.

Ongoing Costs:

• Monthly loan repayments: Principal plus interest
• Homeowners insurance: Required by most banks
• Municipal rates and taxes: Based on property value
• Levies: If applicable (sectional title/estates)
• Utilities: Water, electricity, internet
• Maintenance: Typically 1% of property value annually
• Security costs: Alarm systems, armed response

Budget for these additional expenses to ensure you can truly afford the property you’re purchasing.

Understanding Qualification Requirements

Minimum Requirements for Home Loan Approval

To qualify for a home loan in South Africa, you generally need to meet these criteria:

Age: 18 years or older

• Income: Stable income with sufficient affordability
• Employment: At least 6 months in current job (employed) or 2 years of business operation (self-employed)
• Credit score: Minimum score of 610, though 661+ is preferred
• Deposit: Typically 10-20% of the purchase price (though 100% loans are available)
• South African status: Citizen, permanent resident, or valid work permit

Credit Record Essentials

Your credit record is the most critical factor in your home loan application. Banks use this to determine both your eligibility and interest rate.

Understanding credit scores:

• 781-850: Excellent – Best rates and high approval chance
• 661-780: Good – Favourable rates and strong approval odds
• 610-660: Fair – Higher rates but still approvable
• 500-610: Poor – Difficult to get approval, very high rates if approved
• 300-499: Very poor – Unlikely to be approved

How to improve your credit score:

• Check credit reports for errors and dispute inaccuracies
• Pay down outstanding debts, especially high-interest accounts
• Reduce credit utilisation ratio to below 30%
• Make all payments on time
• Limit applications for new credit
• Settle and close unnecessary accounts

Get your free credit check as part of ooba’s preapproval process to understand where you stand.

Home Loan Options for Different Applicants

First-Time Home Buyers

As a first-time buyer, you have access to special programs and benefits:

• First-time buyer subsidies from certain banks
• Government FLISP subsidy (for those earning R3,501-R22,000 monthly)
• Access to 100% home loans (no deposit required)
• Lower deposit requirements with some lenders

Co-Applications and Joint Home Loans

Applying with a spouse, partner, or family member can increase your borrowing power:

• Combined income improves affordability
• Shared responsibility for repayments
• Both parties must meet credit requirements
• Joint ownership requires a clear agreement on shares and responsibilities

FAQs About Home Loan Applications

How long does it take to get a home loan approved?
Most banks provide an initial response within 2-5 working days. Final approval can take 7-14 days, depending on the complexity of your application and any additional information required.

What interest rates can I expect?
Interest rates typically range from prime minus 1% (for excellent applications) to prime plus 2% (for higher-risk applications). As of April 2025, the prime rate is 11.00]%.

FAQs About Home Loan Applications

How long does it take to get a home loan approved?
Most banks provide an initial response within 2-5 working days. Final approval can take 7-14 days, depending on the complexity of your application and any additional information required.

What interest rates can I expect?
Interest rates typically range from prime minus 1% (for excellent applications) to prime plus 2% (for higher-risk applications). As of April 2025, the prime rate is 11%.

Can I get a home loan with a bad credit score?
While possible, it’s difficult to get approved with a score below 610. If approved, expect higher interest rates and deposit requirements. Working on improving your score before applying is recommended.

How much can I borrow?
Most banks will lend up to around 30% of your gross monthly income. Use ooba’s affordability calculator or get pre-qualified to determine your specific amount.

What happens if my home loan application is declined?
With ooba Home Loans, we submit to multiple banks, so if one declines, others might approve. If all decline, our experts can help you understand why and develop a plan to address the issues.

Can I apply for a home loan if I’m self-employed?
Yes, but you’ll need additional documentation proving your income stability, including financial statements, tax returns, and a letter from your accountant.

So when you’re ready, apply with ooba Home Loans to get the best deal on your bond.

• Higher approval rates: Over 80% of our applications are approved, compared to the industry average of 60%.
• Better interest rates: Banks compete for your business, often resulting in better rates. 0.25-0.5% lower than direct applications.
• Time-saving: One application reaches multiple banks.
• Expert guidance: Dedicated consultants support you through the entire process.
• Free credit checks: Understand your financial standing before applying.
• Negotiating power: Professional negotiators work to improve bank offers.

Our service is completely free to you, as we’re paid by the banks when your loan is approved.