For some of us, especially entrepreneurs and those who have too many debts, getting a home loan is as hard as climbing Mt Kilimanjaro. As you know, you need a minimum of 6 months training to climb this mountain and so it is with applying for a home loan. Give yourself at least 6 months to get your credit score right. If you are married in community of property and you want to buy a home, both spouses must have a healthy credit record.

  1. Use a STOP order to pay your debts so that you pay them timely every time. Paying your debts late can affect your credit score negatively as you will be labelled a slow payer
  2. If you are an entrepreneur, pay yourself a monthly salary to indicate that you can afford to pay yourself and to pay for the home that  you want to buy. A small salary is better than no salary at all
  3. Make sure that you do NOT bounce any debit orders as this indicates that you are cash strapped. So let all your debit orders go through before you spend money
  4. If you have too many accounts e.g. personal loans, clothing store accounts, furniture store accounts, credit cards, etc… Try and pay some of these in full and close the accounts. Pay the little ones and the high interest ones first so that you can get progress ASAP. Having too many accounts and monthly commitments is NOT good for you
  5. Reduce your limits on your credit cards, clothing store accounts, personal loans, etc… so you increase the amount you could qualify for
  1. If you are a member of a stokvel or mogodiswano; keep the money you received in your bank account and do NOT use it. Keep it there a few months before you apply for a home loan so that when they check your bank account, they can see that you have a positive bank balance. This will make the banks realise that you have enough cash to pay a deposit, possibly bond registration and transfer costs and this will improve your chances of qualifying for a home loan. This would also enable you to get a better rate of interest
  2. Make sure that you always have money in your account. If it means you must reduce visits to the hair salon, eating out, and other nice-to-have expenses, do so. Having floating money in your account shows that you do not have cash flow problems so take a close look at your bank statement and your budget and cut out unnecessary expenses
  3. Pay your accounts and other commitments monthly. Do not skip months as this suggests that you can’t meet your monthly obligations so you don’t have money to pay for a home loan
  4. It is good to check your credit record about once or twice a year so you can catch any wrong information asap. But be careful not to have too many credit checks as this could suggest you are desperate for credit
  5. Pay what you are required to pay monthly, or a little more if you can but do NOT pay less as this suggests you can’t afford to pay the full amount and will negatively affect your credit score

BEFORE YOU GO VIEWING HOUSES

  1. Find out how much you are likely to qualify for when you apply for a home loan. This is based on your salary / income. At ThuthukaSA Home Loans, we can help you to find out how much you are likely to qualify for, email us at info@thuthuka-sa.co.za. Once you know how much you qualify for, we will then help you to open a short-term investment account so that you can save about 10% of the amount you qualify for. This investment account will improve your chances of qualifying for a home loan as it indicates that you have surplus cash monthly and you could therefore service the home loan account with ease. You can use this money to pay a deposit and for the legal costs of buying a home
  2. Know what your transfer costs and bond registration costs are likely to be and save for legal costs so that you improve your chances of qualifying for a home loan. We at ThuthukaSA Home Loans can help you with the estimation of these costs if you email us at info@thuthuka-sa.co.za

Suggested reading: Chapter 1 of the book From Debt to Riches entitled “ Why I want you to get out of excessive debt