A Guide To Getting A Home Loan If You Are Self-Employed

A guide to getting a home loan if you are self-employed working for yourself has many advantages.

You can often set your own hours, have control over your business's direction, and enjoy the lion's share of its profits. Of course, there are pitfalls too. No work means no pay, there's nobody to cover for you if you get sick and your financial situation can be unpredictable. When you're self-employed, it can also feel like you have to jump through more hoops to acquire financing than salaried employees do. The biggest personal purchase you may make in your life will be a home, and this will usually require applying for a home loan.

We've all heard about a friend or acquaintance who's a commission earner, freelancer, small business owner, contract worker, or sole proprietor who struggled to secure a home loan due to their employment status. While this can make you apprehensive, it shouldn't. Provided you make certain preparations before you apply, you can increase your chances of success.

These are some of the documents required by SA Home Loans. You may be required to submit additional or different documents based on your individual application and circumstances. You can find more information about the required documentation here.

Determine your affordability

Your first step towards ensuring you meet any self-employed home loan requirements will be determining what you can afford to spend. You can use our affordability calculator to get a reasonable estimate of what you qualify for, bearing in mind that it's still subject to the terms and conditions of your application. As a rule, you should not pay more than 25% of your average monthly income on your repayments, so keep this in mind when making your calculation. You should also account for additional costs that will accompany the process, such as mandatory transfer, registration, and insurance costs. While some home loans are accessible to buyers without a deposit, the larger your deposit is, the better your chance of approval will be.

When doing this, it's important to separate your personal and business finances completely. Failure to do so can cause delays down the line or even compromise your ability to get a loan. If you plan on purchasing a property with a spouse or family member, they may be required to provide documents in addition to yours.

Shortlist suitable properties

Detailing what you're looking for in a home before applying for a self-employed home loan is critical. When calculating the projected total cost and value of a property, you'll need to account for any rates, levies, and taxes you may need to pay monthly and other associated moving costs. The clearer image you can create of what the total cost of your home could be, the quicker your search will be, as you shortlist properties suited to your budget.

Secure an offer to purchase

Once you've found a property that meets your requirements and is affordable, you can put in a valid offer to purchase — which both parties must complete in full and sign. Make sure this includes anything the sale specifically includes and excludes, and your desired date of occupation.

Gather your financial institution's required documents

Your next step towards securing your choice of home loans for self-employed people is to gather the required documentation for the application process — bearing in mind that financial institutions can require different or additional documents and that each document should offer consistent, correct, and updated information.

Here are the documents that SA Home Loans requires from self-employed individuals: You could require all or some of the below documents:

These are some of the documents required by SA Home Loans. You may be required to submit additional or different documents based on your individual application and circumstances. You can find more information about the documents that SA Home Loans requires from self-employed individuals.

• Proof of income
• A dated and signed letter of drawings from your accountant, featuring their letterhead
• Your last six consecutive months' income reflecting bank statements (personal and business)
• Your last two years' annual financial statements. If these are older than 6 months, you'll need to submit management accounts not older than two months on top of this. These will need to be signed by yourself and your accountant
• A copy of registration documents or trust deed
• A copy of your ID

Partner with the right team

Loans for self-employed South Africans can involve a lengthy and time-consuming process. However, you can streamline it and make it less stressful by partnering with someone with experience in the field. Not only can they help guide you through the process but they can also help you clarify what's required from you and keep you on track to meeting any outstanding requirements.

SA Home Loans have experience in successfully guiding self-employed clients towards home ownership.