For home buyers that are self-employed, the bond application process might seem more daunting than those that work for an employer – however, it is not impossible and by being prepared it can go a whole lot smoother.
How do I apply?
As with any home loan application, the best is to be prepared with a deposit, and for those that are self-employed the bigger the better.
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. Some banks might even go a step further when the applicant’s income is varied and ask for the latest 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. Having these documents ready if you do get asked for them will help the process along so make sure they are on hand at all times.
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.
Documents I need
- Proof of income: Letter of Drawings from an Accountant (for all applicants if applicable).
- Personal Assets & Liabilities Statement.
- Latest 2 years’ Annual Financial Statements.
- Where Annual Financial Statements are older than 6 months to date, Current Management Accounts not older than 2 months signed by the applicant and accountant must be provided in addition to the Annual Financial Statements.
- Copy of Marriage Certificate or ANC Contract.
- Copy of Registration Documents or Trust Deed.
- Application form and Consent Document
- Copy of Purchase Agreement.
Where do I apply?
Make sure that if you are going to be applying directly at the bank that you have all documents on hand and you understand what is expected from you.
Original Article: https://www.myproperty.co.za/news/market-and-opinion/self-employed-and-applying-for-a-bond-what-you-need-to-know-01-03-21
