Getting a home loan approved in South Africa is a process - and like most processes, it goes more smoothly when you know what to expect. This guide covers everything from preparing your application to understanding the terms of your approval.
Before You Apply: Get Your Financial House in Order
Banks assess home loan applications on two main questions: Can you afford the repayments? And are you a reliable borrower? Here's how to answer both convincingly.
Credit Score
Your credit score summarises your borrowing history. In South Africa, credit scores are maintained by credit bureaux (TransUnion, Experian, Compuscan). You're entitled to a free credit report once a year from each bureau.
A higher score improves your chances of approval and usually results in a better interest rate. Before you apply:
- Check your credit report and dispute any errors
- Pay all accounts on time for at least six months before applying
- Reduce or close unused credit facilities
- Don't apply for new credit in the months before your home loan application
Debt-to-Income Ratio
Banks calculate your total monthly debt commitments as a percentage of your gross monthly income. The lower this ratio, the better your application looks. If you have high-interest debt (store cards, personal loans), paying it down before applying can make a material difference.
Savings and Deposit
Having a deposit significantly improves your application. A 10% deposit on a R1.5 million property is R150,000. Not everyone can achieve this, and 100% bonds exist - but even a small deposit (5%) changes the risk profile of your application.
The Documents You'll Need
For employed applicants:
- Last three months' payslips
- Last three months' bank statements (the account your salary is paid into)
- Certified copy of ID
- Proof of address (not older than three months)
- Signed Offer to Purchase
For self-employed applicants:
- Last two years' financial statements for the business
- Last two years' personal income tax returns
- Six months' business and personal bank statements
- Certified copy of ID
- Proof of address
- Signed Offer to Purchase
Self-employed applications are more complex and take longer. Use a bond originator who has experience with self-employed applicants.
Using a Bond Originator
A bond originator submits your application to multiple banks simultaneously and handles the administrative process on your behalf. This service is free to the buyer - originators earn a commission from the bank upon successful registration.
The advantages:
- Multiple bank submissions increase your chance of approval
- Banks compete for your business, which often results in a better interest rate
- Originators know what each bank requires and can help you present your application optimally
The main originators in South Africa are ooba Home Loans and BetterBond.
What Banks Assess
Banks assess home loan applications on several criteria:
Income and affordability. Your net income minus all monthly expenses and debt commitments. Banks want to see that you have sufficient residual income after the bond repayment.
Credit history. Your track record of repaying debts. Late payments, defaults, and judgments are serious negatives. A clean payment history over several years is the ideal.
Employment stability. Permanent employment looks better than contract employment. Self-employment requires more documentation but is not a barrier.
Property valuation. Banks assess the property itself. If the purchase price exceeds the bank's valuation, they'll lend against their valuation, not the purchase price - meaning the buyer needs to make up the difference.
Understanding Your Offer of Finance
When a bank approves your home loan, they issue an offer of finance (also called a grant letter) specifying:
- The loan amount
- The interest rate
- The loan term
- Any conditions
The interest rate matters. Even a 0.25% difference on a R1.5 million bond over 20 years affects your total repayments by tens of thousands of rands. Negotiate your rate. If you have a clean credit history and a deposit, you have leverage.
Prime minus is the best outcome. Prime plus means you're perceived as higher risk. A competitive application from a good borrower should achieve prime or prime minus.
After Approval
Once you accept the offer of finance, the bond registration attorneys (appointed by the bank) take over. They prepare and register the bond at the Deeds Office, which happens simultaneously with the property transfer.
Bond registration fees are paid by the buyer and are separate from the transferring attorney fees.