Buying a home is one of the greatest achievements in a person’s life. However, affordability is often a barrier for many self-employed, freelancers, contract workers, and pieceworkers, which can often put off aspiring homeowners.
Banks have recognized several sources of income to help customers own their dream home. Although having formal employment status has often been a barrier for aspiring homeowners, banks such as FNB are considering multiple sources of income to increase the affordability of home loans. For example, entry market clients earning up to R7,500, consisting of the following: R5,000 from an employer and R2,500 from a side business, with relevant supporting evidence, will be counted as monthly income towards the affordability of a home. loan request.
Owning a home is an emotional experience for families, but many are unaware that they can pool multiple sources of income to increase their chances of qualifying for a home loan. Our consideration of multiple sources of income is due to our realization that a significant portion of consumers in South Africa do not earn enough to meet the minimum requirements for credit products such as a home loan, even if they have an impeccable credit record and a proven track record. source of income.
Whether you are self-employed, freelancer, contractor or part-timer and derive income from one or more sources, or your income fluctuates from month to month or even every six months; you would need to show an income history and bank statements can usually prove this. While we recognize multiple revenue streams, we must also be a responsible lender when extending credit to customers.
FNB shares four key considerations consumers need to remember when buying a home:
- Prepare your supporting documents: Before applying for a home loan, make sure you have the necessary documents, such as proof of income. Freelancers, contract workers and pieceworkers must have documents that confirm the source of income. If you are a gardener or domestic worker with several clients, each of them can write a letter or affidavit confirming that they are using your services, for how long and for what costs.
- Check your credit: A good credit history increases your chances of getting a home loan. Credit bureaus will keep track of your personal credit obligations and rate your debt repayment performance using a credit score chart that shows how well you manage your debt. Always make payments on time and in full. Clients using the FNB app can navigate to nav>>Money on the FNB app to improve the way they manage their money.
- Get pre-approved: A home loan pre-approval helps you shop with confidence knowing how much you potentially qualify for. A pre-approval is a good indicator of how much mortgage the bank can give you. It also means that when you go house hunting, you are looking for the right price range for your budget.
- Save for a down payment: While a bank can always provide a 100% home loan with no down payment required, we recommend first-time home buyers consider putting down at least a 10% down payment to ensure that their home loan repayments are manageable. A deposit increases your chances of getting a home loan because it demonstrates that you are financially responsible.
First-time homebuyers should also consider the Funding-Linked Individual Grants Program, a housing grant for first-time homebuyers to help with the purchase of a home.
We help our clients throughout this process to increase their chances of becoming owners.
The National Treasury’s announcement in 2020 to waive transfer tax for properties priced at R1 million or less is another benefit that could help reduce the cost of home ownership.
- Potwana is the CEO of the ETF entry market
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