How to secure your first home

Kzenon via www.canva.com

How to secure your first home loan

There are many reasons for buying your own home. Some of them may be purely financial, like getting onto the property ladder as an investment, but more often than not, it is for personal reasons, like the imminent arrival of a baby or a commitment to a specific lifestyle.

How to secure your first home

Kzenon via www.canva.com

No matter your reason, if you do not have the cash in the bank, you will need to secure a home loan. Qualifying for a home loan is similar to buying health insurance. The healthier you are and the healthier your lifestyle, the easier it is to get. Likewise, the healthier your finances, the easier it is to secure the loan you need. For this reason, Nedbank refers to your ability to qualify for a home loan as your “credit health”.

Credit health is mightily important because banks rely on your borrowing and repayment behaviour with credit providers to be able to see how risky it is to lend you money. By ensuring good credit health before any credit application will improve your character as a borrower.

When banks measure your credit health, they look out four Cs. These are:

  • Character

    To establish a healthy credit character you need to build up a positive credit history. To do this, you will need to prove that you have used credit before, you have not hopped from one address to the other without good reason, you pay your bills on time, and you do not jump from job to job without good reason.

  • Capital

    Banks like to see that you have attempted to build up capital investments, such as savings and investments.

  • Capacity

    If you have been working regularly banks will know that you are likely to earn enough income capacity to repay your loan.

  • Collateral

    As an additional source of security, it is not always possible for first-time property buyers to have collateral because it is often considered to be another property you already own. However, if you score high on the first three Cs, banks may waiver collateral as a precondition.

It is in your best interest to have a firm grasp of your credit health before you approach a bank for a home loan. So take some time out to check on your own credit score. Nedbank Home Loans recommend these three free online services to do this: Experian, Transunion or Expert Decision Systems. You will need to register for a free trial.

If you do find that you are not credit healthy, give yourself an opportunity to alter your credit behaviour to ensure that your credit health is acceptable before you apply for a home loan. It is the same approach that you would take when you stop smoking and join the gym before your health insurance provider offers you a cheaper premium.

Once your credit health is secured, you can decide which loan product will be best for you. You can pick one of several home loan products offered by Nedbank, which you will find here. Once you have picked your product, your journey to owning your own home can start.