How To Qualify For A Home Loan in South Africa (2022)

Owning your home gives a sense of stability and a sense of accomplishment that few other things can give. It is also a great investment because when one becomes advanced in age, the tolerance for threats of eviction from the owners of houses becomes minimal. Therefore, rather than being permanent renters, many young people in South Africa have started making the choice of owning the houses they live in, even when their earnings are not very large, so the question of how to qualify for a home loan in South Africa comes up.

As expected, a huge property market has emerged in South Africa, as demand for houses has continued to rise. With the demand has come investors in the form of companies- even from abroad, and the banks and other financial institutions have jumped in, trying to fill in the gaps, and provide financial services that help make this dream a reality.

One way that they jumped in, to provide financial services, is to make loans available to people who want to buy houses. But of course, banks will not just hand over bags of cash to anyone who asks for it- such a system would soon be abused. Therefore, there are a few conditions or requirements that intending borrowers must meet before they are given loans.

How To Qualify For A Home Loan in South Africa

Be a South African citizen, and be over the age of 18.

Earn a regular income between R3,501 and R22,000 per month.

Get married. Or at least be cohabiting, or have at least one dependent.

Do not enter any other government housing programme or subsidy.

Pay off any existing debt you currently have, and have a good credit rating.

What are the requirements for a Home Loan in South Africa?

Well, that all depends on the exact type of home loan that you want. Financiers usually categorize the requirements for the loans according to the amount involved, and the payment options. Let us now look at the requirements, and how to meet them in order to get a Home Loan in South Africa.

Of course, owning a home involves money and so in order to qualify to receive a loan in order to own a home the lender has to be sure that you can payback. That means you need to have steady employment and make steady money.

Another thing that you must have is clean credit history. This is true, even though most times it is not cited as a reason why applications are declined. Sometimes, the applicants are only told that the financial institution will not be able to fund their applications at the time.

However, investigations have revealed that banks will only approve applications for home loans if the applicant has a credit score of 600 points and above. Every lender has his own margin which he may use, but it will be very difficult to secure a home loan with a credit score that is lower than 580 points.

This is because the home loan is a long-term commitment, and the banks are guided by your past ability to pay off loans, so as to decide whether you can pay off the loan without difficulty. 


What is the Minimum Income to Qualify for a Home Loan?

In order to qualify, you must have a household income that is between R3,501 and R22,000 per month.

Homeownership should ideally not be the exclusive preserve of the rich and wealthy in society, and so for that reason, there are initiatives both in the government and private sector that seek to make homeownership easier for first-time homeowners, by providing 100% home loans. The FLISP is a government programme that grants a subsidy to first-time homebuyers. This programme has brought down the minimum income with which a person can aspire to become a homeowner.

In order to qualify, you must have a household income that is between R3,501 and R22,000 per month.

 That is not all; you must also be a South African citizen over the age of 18 and must be either married, cohabiting, or single, in which case you must have at least one dependent.

 You must also not have benefited from any previous government housing programme or subsidy.

If you meet these criteria, then you will get a government subsidy, but said subsidy is dependent on the amount of money your household earns.

The program is designed to provide the highest subsidies to the lowest-earning households. The higher your household earnings are above the R3 501 threshold, the lower the subsidy you get. The highest subsidy you can get from the government is R121 626 for earnings of R3 501 to R3 700 per month, and the minimum subsidy you can get is R27 960 for earnings of between R21 801 to R22 000 per month.


How Much Do You Need To Earn To Qualify For A Home Loan In South Africa?

You need to earn at least R3 501 per month in order to qualify for a home loan in South Africa. However, the fact that you earn this amount monthly will not guarantee that your home loan is approved. There are other factors that must be considered before a home loan can be approved, and that includes your credit score and history.


How Long Does It Take For A Bank To Approve A Home Loan In South Africa?

 Usually, in South Africa, it only takes around one week for your home loan to get approved.

This straightforward process can sometimes be delayed if the applicant fails to meet some requirements. Therefore if you have applied for a home loan, and have not heard anything from the financier then you can quickly get in touch with their customer care representatives in order to find out what has gone wrong.


What you Need to Know about Home Loans

The first thing you need to understand is the purpose of the home loan. A home loan is a contract between you and a financier; a win-win agreement in which you get to own the home you want, and the financier (usually a bank) gets to make some money as profit through interest on the loan.

You’ll pay back the loan in installments over a set period of time. This works best if you have your account with the bank, so they just deduct their monthly installment every month. It is also possible to bank with one bank and get a home loan from another bank. In that case, the lender will take back their money with a debit order of the agreed installment which will be deducted from your account, every month until the loan plus interest is fully paid.

Please bear in mind that the bank will keep the title deed for the property until you have fully paid back the home loan.


100% Loans in South Africa

A popular kind of loan in South Africa these days is a 100% loan in which the bank provides the full costs of the house, and you pay them back in small installments. This option is an expensive option, but is also a popular option, especially among the younger generation of borrowers who may find it hard to scrape together the down-payment for the house, and so may decide to pay in small installments.


Owning your home is a smart option, not just because of the sense of achievement it comes with, but also because of the opportunity it offers for you to make capital gains by participating in the South African property market. 

As with all loans, it is important to take careful consideration before applying for a property loan. It is the practice of the banks to lower the monthly installments as much as possible, also stretching out the payments as long as possible. Even when a person is employed in a very secure job, that may not be the best option because the banks will take possession of the house when you fail to meet your monthly payments. Therefore, please only go for a house you can afford, and try to pay off the loan as quickly as possible. 

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