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You have found your ideal home and it's time to put in that offer to purchase. Any savvy individual who has embarked on their dream home buying journey knows, getting pre-approval is key. It also helps avoids any red flags that might see your home loan turned down.
This ensures you're able to put in an OTP and minimise any chance of having the perfect home snatched from your nose. One way to approach this is to use a bond originator, who is able to submit applications to more than one bank on your behalf.
It is important to note that there are several reasons a home loan application could be turned down.
Homeowners insurance is mandatory to qualify for a bond as it covers the financial institution’s investment. One of the factors determining the monthly premium is the replacement value of your property. Most financial institutions offer this coverage, however, it is advisable that you shop around for an offer that suits your needs and your pocket best.
If you’ve found your dream home, then there are some strongly advisable checks you should consider conducting, prior to putting in an offer to purchase. Marius Steyn, Personal Lines Underwriting Manager at Santam – SA’s leading short-term insurer - suggests conducting a home inspection prior to purchase, then putting in a clause that an offer to purchase is subject to stipulated repairs.
“Remember, your insurer is only responsible for damages occurring from the date of registration of your new home at the deeds office, onwards – not for any prior problems. This means you need to have any damages fixed by the seller, as a condition of your offer. Otherwise, these could become big issues down-the-line.”
Get a quote on combining your building and home contents insurance and save.
Add to that, keep the following in mind which could affect your homeownership goals before you've even started:
- A poor credit score can see your hope of homeownership dashed before you even get started. It’s advisable to obtain a copy of your credit report from the credit bureau. Check for any errors or credit issue so that your report can be clear and updated. Having judgements or too many inquiries on your credit score can also work against you. Did you know South African legislation as part of the National Credit Act entitles you to a free credit report every year, with any one of the credit bureaus listed below. Yet it is estimated that fewer than 5% of us make use of this financial health option.
- While some people overspend, having a limited credit history can also work against you. A track record of borrowing and repaying of credit allows assessors to determine that you will be able to repay your bond, and on time too.
- Late payment or missed payments or not making the required payment can certainly impact your ability to secure the best possible deal in terms of the loan-to-value ratio (ratio of the size of the loan to the value of the property) as well as the interest rate for the loan.
- Searching for a home is one thing. But if your monthly income is too low for the price-range you're looking at, then you are setting yourself up for failure. Click here to check you affordability and make sure you not only meet the monthly repayments - but also other household expenses and any other unexpected expenses when buying a home.
- If balances on your existing loans are too high, this could see the bank questioning your ability to repay your bond as well. It all boils down to affordability.
Make sure your application contains all the necessary information, and always notify your creditors when you change jobs as it could be a strike in your bond application if income information is not up to date. By getting pre-approved for your home loan first you'll avoid being disappointed. It also gives you a solid indication of what you can afford on a new home.
Similarly, shop around for the best deal when it comes to your combining your building and home contents insurance and save.
More reasons to insure with Santam
Santam also offers free 24/7 SOS services related to road assistance, home assistance, route assistance, medical assistance, home drive assistance and legal advice. Just call 0860 505 911 or speak to your broker.
As South Africa’s largest short-term insurer, insuring risks of over R4 trillion. "We’ve paid out 99% of all claims made in the past year. We also offer the following cover and benefits:
- Comprehensive cover for your household contents in the event of water damage;
- Standard excess for vehicles and buildings; and
- Six free SOS services to all personal lines clients.
If you have any questions about building insurance, speak to a Santam broker or contact them on 0860 444 444. If you’re an existing Santam client, you can add new items and make changes to your cover on the Santam client application. You can also use this online Santam directory to locate a trusted broker in your area or email clientportal@santam.co.za for assistance.
Try this handy building calculator tool to help you make an inventory of all the structures on your property. Or click here to have a professional risk assessment done.
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