How to apply for a home loan if you are self-employed

Although self-employed bond applicants usually find buying a property can be a little trickier than those in permanent employment with a steady income, it’s not impossible to get a mortgage loan.

“To put in a strong offer that is likely to be accepted by sellers and likely to get a bond approved, it pays to be fully prepared ahead of time with all the necessary documentation before the offer is signed,” says Nelio Mendes, marketing manager of property company SAProperty.com.

The four major banks vary slightly in their evaluation criteria when a bond application is made by a person who is self-employed, but the common requirement is proving that there is a steady income and that about 30% of the average net income can be used to service a home loan.

One of the first things the banks will ask for is a letter from an auditor proving income and profit or if the applicant is a shareholder in a company, an auditor’s letter confirming the shareholding percentage of the applicant.

Banks also ask for the applicant’s latest three months bank statements for their personal account. One bank goes one step further in saying that if the applicant’s income is fixed, it requires three months’ bank statements but if the income is varied, then statements for six months. The applicant must also provide the latest six months bank statements for the business account and financial records for the last two years.

Banks may also ask for the applicant’s latest tax certificate, and in some cases for the last three years. Mendes says although this isn’t mandatory, it is advisable to have this documentation on hand in case it is called for.

If the applicant is divorced and maintenance is part of the regular income to be included in the earnings to be able to qualify for a bond, a copy of the divorce decree stating this should be included.

If there are any lease agreements where income will be included in the income statement of the applicant, the rental amount must be current and not predicted future amounts. Some of the banks ask for copies of lease agreements in place or rental schedules.

“While getting all of the above documentation seems onerous, it can be understood that the banks want to be sure income is regular and sound, and they need to protect themselves as much as possible. Most of the paperwork is part of regular business and personal accounting, so it should not be too much trouble, considering the size of loan an applicant is often applying for. SAProperty.com can also assist with home loan applications through its dedicated in-house bond originator,” says Mendes.

Call Nelio Mendes on 082 868 3539 or email nelio@saproperty.com.