Financial Adviser | Qualifying for NHT loan to buy land

Q:I would like to know the steps necessary in applying for a NHT loan to buy land. That is, what do I do before going to the NHT and while there?

- S. Bailey

A: Contributors to the National Housing Trust (NHT) may obtain a Housing Lot Loan to purchase land from private individuals or companies. This is called a non-home-owners' loan. That is, a loan for individuals who do not already own a home and have never borrowed from the NHT.

Before applying for the House Lot Loan, you should ensure that you meet the minimum requirements. To know if you meet the minimum requirements, you should answer the following questions:

- Have you identified the lot that you wish to buy?

- Have you agreed on a price with the seller and drawn up a formal sale agreement?

- Have you made at least a 5 per cent deposit on the property?

- Do you earn an income that allows you to repay the loan?

- Are you now contributing to the NHT?

- Have you made at least 52 weekly contributions, 13 of which were made during the last 26 weeks?

- Are you able to account for your contributions and have paid up, with interest, any outstanding contributions due in the last three years?

- Are you between the age of 18 and 65 years?

If your answer to all the questions above is 'yes', you meet the minimum requirements for applying. You should then follow the NHT's loan processing steps:

- Call or visit the NHT to determine if you pass the affordability test.

- Gather all of the documents needed.

- Take all the documents to the Customer Service Department or the Mortgage Information Department.

At the end of this visit, you should obtain an eligibility letter. Thereafter, do the following:

- Prepare all the required prequalification documents outlined in the loans checklist on the NHT website.

- Contact the NHT to set an appointment for a prequali-fication interview.

- Attend the prequalification interview, taking with you all the required prequalification documents.

- All issues that need to be discussed/resolved will be addressed. You will be contacted within five working days of the prequalification interview and given a loan interview date

- Attend a loan interview at the New Loans Department.

- You must have at the interview the deposit receipt, sales agreement, a copy of the registered title, the surveyor's identification report and the valuation report.

- At the end of this interview, you should obtain a letter of commitment.

The NHT will then process your loan and contact you once processing has been completed.

Through the House Lot Loan, you can borrow as a single applicant or you may co-apply with one other qualified NHT contributor to access a higher loan limit to purchase the residential lot. The loan limit is $2 million per applicant and $4 million with a co-applicant.

Joint-finance mortgage

If you need, and can afford, to borrow more money, you may seek additional funds from another lending institution that is willing to enter into a joint-finance mortgage with the NHT.

The mortgage-lending institutions that participate in this arrangement with the NHT limit how much they lend to buy a residential lot. In one case, the ceiling is 75 per cent, and this is inclusive of the portion from the NHT. The building societies require that such land should have access to road, water and light, but in the event that one or more of these is absent, one building society reduces the maximum to 50 per cent.

You could also be eligible for a loan under the Fifteen-Plus Loan facility if you last borrowed from the NHT 15 or more years ago. Although you would normally use it, if you wish, to repair the property that you bought then, or some other house that you now own and occupy, you could also use it to secure home ownership a second time if you no longer own a house.

To use the Fifteen-Plus Loan to buy land for constructing a house, you would need to write to the NHT to get its approval.

- Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel. finviser.jm@gmail.com