Get your mortgage approved like this!
21 October 2020 | Opinion
Attempting to purchase a house without a plan in place can be a challenging situation. As a first-time homebuyer, you will need to prepare in advance. The steps below can help you buy a home more conveniently and reach the best outcome possible.
• Preparation: Before you start with the application process, you need to understand how banks assess the application; the required documents, and most importantly, the costs involved in the entire process. For instance, besides the property's actual price, there are other costs, such as transfer duties and conveyancing fees, which you will need to keep in mind. Ask your estate agent or branch what these are likely to be.
• Keep your bank accounts healthy: In the time leading up to your home loan application, make sure that your bank accounts are healthy and portray the right image to your mortgage lender. This means that you should not have late payments, unpaid debit orders, or overdrawn accounts throughout the application and purchasing process.
• Pay your bills on time, and do not commit to any other financial obligations until your home loan application is successful. Banks require at least six months' bank statements to gain a full picture of your finances. If you are self-employed, the bank will need additional financial information, for instance, a cash flow statement in addition to your balance sheet, and income statement. Having these documents ready will speed up the processing of your loan application.
• Monthly commitment limit: Work out your budget and how much you can afford to pay in home loan repayments every month. Be realistic with your budget. A Mortgage Calculator, available on Bank Windhoek’s website, is an excellent tool for understanding how much you can afford. It is user-friendly and shows you what your monthly mortgage payment would be, taking into account different house prices and interest rate scenarios. The interest rate is one of the main contributors in determining the cost of your home loan. It is useful to know which way they are heading and the best time to buy your house.
• Get pre-approval: This is a document from the bank that indicates how much they are prepared to lend you and the price range of the homes you can afford. Pre-approval is so important that often property sellers and estate agents will not consider your offer on a property without it. To get a pre-approval document, the bank will need your payslip, Home Owner’s Scheme for staff member’s (HOSSM), or a subsidy letter from your employers, six months' bank statements, and proof of residential address (municipality bill) or lease agreement if you are renting (Rental Contract).
• Time to shop around: Understand the financial options that banks have available, like the Bank Windhoek Extended-term Home Loan, which gives you 30 years – or 360 months to pay back the loan. This extended period means a lower monthly mortgage instalment, especially for the entry level buyer. After a few years and as your financial standing improves, the bond can be paid off well within the 360 month period. Every homebuyer has its unique financial position, and it is essential to understand which term suits your needs best.
• Best time to buy: With the current low interest rates and Bank Windhoek’s Extended-term Home Loan, this is the opportune time to become a homeowner. Compared to renting, homeownership is more beneficial in the long run, since renting does not grant you control over the property. Other benefits are paying your mortgage monthly that allows you to build on equity, which adds value to your personal wealth; you can rent part of your home to generate additional income and allows you to access your employer’s housing benefits, like a subsidy; your house can be used as security when you refinance to fulfil other obligations; and the house safeguards your financial future through repaying the loan before retirement.
To make the application process a seamless and stress-free experience, cooperate with the bank as much as possible. Be honest about your financial standing and provide any information they require from you.
As you shop around for property, look for the best deals, enquire about the valuation of the property you are interested in as the bank will only finance a house based on its valuation amount. You can do this with help from an estate agent or visit the Bank Windhoek Property Finance Division for advice.
*Loide David is Bank Windhoek's Market Research Analyst.