Owning a buy-to-let property is not only reserved for high earners. With the correct know-how “under your belt” and financial strategy, even South Africans earning a modest salary can potentially get home loan application approval. If you are a first-time buyer of rental property, we’ll delve into five actionable steps you can take to become a property investment home buyer.
1. Gather the right documents for your home loan application
The beginning step on to approval is having all your documents for your home loan application complete and accurate. Banks or financial lenders will need to do a financial assessment of your financial situation before granting you home loan approval.
The essential documents you need include:
- Your South African ID
- Three to six months’ bank statements
- Your latest 3 months’ payslips or proof of income
- If you earn overtime or commission, then 6 months’ payslips will be required
- A completed home loan application form
- Proof of residence
It is important to check your credit score at least 6 months before your home loan application. If your score is too low, read our handy blog post that does a deep dive into credit scores and improving them: How to Improve Your Credit Score in South Africa.
There are also handy credit score apps that you can make use of to check your credit history over time. A popular app is ClearScore. This app tracks your payment history and notes if you have ever defaulted on a payment in your credit score history. You can download it on the Apple App Store or Google Play Store, or sign up here.
ClearScore also gives you tips on how to improve your credit score. Having a credit score of 650 and above is considered a “good” credit score. This shows banks and financial lenders that you are not owing considerable debt, and it won’t be risky for them to finance your home loan as you have a good credit score and reliable payment history.
2. Get to grips with the home loan application process
Being aware of what goes on during the home loan application process will help you approach it with knowledge and confidence.
The usual process involves the following:
- A pre-qualification
- Submission of home loan application documents
- A credit and financial assessment
- A property valuation
- Final approval is decided upon
How long does a home loan application take?
At IGrow Home Loans division, the home loan approval process can take 1-3 weeks. This depends on the application and how intricate or complicated it is. It also revolves around how quickly you submit your documents. View a blog post where the property purchase and home loan process are discussed in depth: The Guide to Purchasing Property Through IGrow Wealth Investments.
If you partner with a bond originator, IGrow Home Loans, you can improve your chances of securing home loan approval. Our bond originators submit your home loan application to multiple South African banks, improving approval chances, as well as securing lower-than-average interest rates.
3. Choosing to utilise a 100% bank loan or leverage Other People’s Money (OPM)
We would like to bust the myth that you need a huge deposit saved up to purchase an investment property. However, many South African banks offer 100% home loans, especially if the applicant is a first-time buyer with a stable income and good credit score. In this way, no deposit is necessary.
Another way to approach financing is to leverage OPM (Other People’s Money). This is a tool encouraged by IGrow’s founder and CEO, Jacques Fouché. By leveraging OPM via using bank financing or strategic partnerships, you can continue to grow your property portfolio without a huge amount of upfront capital.
“Savvy [or smart] investors know that banks and financial institutions are the best partners you can have. Use their money to buy assets that generate income.” – Jacques Fouché
4. Look out for up-and-coming suburbs rather than established ones
Property prices in established suburbs are high and can become an obstacle to investors. The IGrow team advises that you look for investment properties in growing suburbs where prices are still affordable. These suburbs are perfect for the investor with limited income, where the property they buy will appreciate over time.
High-potential and up-and-coming suburbs include:
1. Cape Town
- The Northern Suburbs: such as Kraaifontein, Parklands North, Belville and Kuils River
- Somerset West
2. Johannesburg
- Rosebank
- Randburg
- Sandton
- Midrand
- Fourways
3. Pretoria
- Centurion
- Hatfield
- Pretoria East
- Lynwood
These suburbs offer affordability, lower transfer duty fees, and high potential rental income compared to those properties found in established neighbourhoods.
5. Embody a long-term investment mindset
Approach your property acquisition journey with a strategy in mind. Don’t be in a hurry throughout the home loan application process.
Using an IGrow bond originator to aid you and guide you through this process is worthwhile! We will assess your affordability and start the application process, and submit any documentation on your behalf.
Because IGrow Wealth Investments has been in operation for nearly two decades, our Home Loans specialist team already have excellent relationships with all major South African banks and financial lenders. This will count in your favour when IGrow Home Loans Bond originator specialists do the home loan application for you.
Final Thoughts
Sealing the deal on your home loan application with a low income is possible. You need to adopt the above 5 steps, have a partner like IGrow Home Loans team on your side, and expert property selection and advice from the IGrow team will help you too.
With IGrow, even if you are leveraging OPM, or applying for a 100% bank loan, our team will make the process smooth and hassle-free. We do the legwork for you, with an aim of your home loan application approval as top priority for our team.
Allow IGrow’s Home Loan Division to help you make your first home loan application, or help you get the next home loan approved in your property portfolio.
Contact IGrow Home Loans department to start the home loan application process today!
