How to qualify for a home loan in South Africa

Article summary

• Ensure your credit score is above 610+.
• Get prequalified so you have an idea of what you can afford before applying for a home loan.
• A home loan comparison service will submit your application to multiple banks, improving your chances of obtaining home loan approval.

Investing in a home is one of the most significant decisions you’ll make, and you’ll want to ensure you have the best chance possible of acquiring your dream home.

Of course, the first requirement is that you be 18 years or older. You also need to be permanently employed for six consecutive months, or self-employed for the past two years.

Aside from that, the most important factor will be your credit history, and you need to pay special attention to your credit score when applying for a home loan. You need a credit score of at least 610+ for the bank to even consider your home loan application, while anything above 650 is considered a decent credit score.

If your credit score is below 610+, you should take steps to improve your credit score. ooba Home Loans, South Africa’s largest home loan comparison service, can advise you on how best to achieve that.

Of course, first you need to know your credit score. We can help with that as well, by getting you prequalified for a home loan.

Prequalification: The first step to home loan approval

Getting prequalified is one of the most powerful ways to improve your chances of qualifying for a home loan.

It will provide you with your credit score, and an idea of what you can realistically afford. This allows you to commence your house hunt with a solid idea of what you’re looking for.

You can get prequalified using our free, online tool, the Bond Indicator.

Alternatively, you can get prequalified with the help of an ooba Home Loans consultant, by following these three easy steps:

Step 1: You’ll need to provide your ooba Home Loans consultant with the details of your monthly income and expenditure, including income tax and living expenses. You’ll also need to state any debts you may have.

Step 2: Your ooba Home Loans finance expert will calculate your pre-qualification amount in accordance with the guidelines of the National Credit Act, and check your credit score. You will then be issued a pre-qualification certificate, which you can give to an estate agent to prove you’re pre-approved and ready to shop for your dream home.

Step 3: Your pre-qualification is valid for 90 days. After this, your ooba Home Loans finance expert will contact you to check whether your expenses have changed during this period of time. If there has been a material change, the prequalification will be recalculated and revalidated. If there is no change to either income or expenditure, ooba Home Loans will reissue a revalidated certificate.

The home loan application process

The home loan application usually takes place after you’ve found a home that meets your requirements, and signed the Offer to Purchase.

Before applying, ensure you have the relevant documentation. The documents you’ll need to submit will vary depending on whether you’re permanently employed or self-employed.

What factors will the bank take into account when assessing your home loan application?

• As mentioned, your credit record will be the most important factor for the bank.
• Your income and expenses.
• The size of your deposit. The higher your deposit, the less risk there is for the bank, and the better the chance you have of securing your home loan.

In summary

To improve your chance of qualifying for a home loan:

• Get prequalified.
• Ensure your credit score is above 610+.
• If possible, make a bigger deposit.

Finally, when it comes time to apply for the home loan, employ the services of a home loan comparison service such as ooba Home Loans. We improve your chances of obtaining home loan approval by submitting your application to multiple banks.

Since banks have different lending criteria, some may be more likely to approve your home loan than others, even if you have a low credit score. Different banks will also offer different interest rates. We help you cast a wide net so you can choose the best deal with the lowest interest rates.

We also offer a range of tools that can make the home buying process easier.  Start with our Bond Calculator, then use our Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.