A growing number of self employed people with incomes dependant on fluctuating commissions face huge difficulties in becoming home owners, says Lanice Steward, MD of Anne Porter Knight Frank.

This, she says, is because the banks, complying with the National Credit Act, have to be especially careful about lending money to people who are employed in positions that might be considered insecure.

“There is a certain arbitrariness about the concept that self-employed people, especially those on short term contracts, are not good security risks because many of these people are high income earners – but that is the way the banks feel obliged to act.”

Self employed people who want to apply for bonds should get all their ducks in a row, she says.

This involves, first, producing all your annual financial statements for the last three years – and if you haven’t been in business for three years the chances of getting a bond are likely to be greatly reduced.

Then, too, you will have to produce:

management (income and expenditure) accounts for the last three months;

a cash flow summary for the last six months (if you are applying to Absa for a loan);

a copy of the lease on your business premises (if they are leased);

six months bank statements;

tax assessments for the last three years;

a signed statement from an accountant confirming your income;

a summary of your personal family expenditure in relation to your income; and

your identity document.

Ironically, says Steward, more people are opting to be freelance entrepreneurs than ever before – some because they were made redundant by the recession or affirmative action policies, others because they see this as the way to achieve a better lifestyle – but it can take years before they own a home.

“No one wants to see South Africa becoming a nation of tenants rather than home owners,” says Steward.

“In the circumstances, those considering buying homes should first talk to a reputable bond origination company which can advise them at what level to pitch their bond applications and how to eliminate potential obstacles (such as unpaid debts) which could mitigate against their getting bonds.

“Fortunately, month by month the banks are easing up on their loan criteria. So, with luck, by 2011 the position of self employed people who want to become home owners will no longer be so difficult and the current difficulties should not deter people from trying to buy while house prices are still at their low levels.”