Buying a home? Get pre-approved

The mortgage pre-approval process is a critical first step in the journey towards home ownership. Petal James, head of mortgage sales at JN Bank, advises that getting pre-approved for a mortgage is crucial, as it provides proof to real estate agents and sellers that the buyer is financially capable of securing a mortgage.

"The pre-approval process is really looking at the total financial health of the customer - that is, their income against their total debt. This will tell you, based on what you earn, what you can afford to pay for a house. Therefore, before shopping around, you need to know how much you are qualified to spend," Miss James advised.

She noted that real estate agents often prefer to work with a buyer who has received pre-approval from a recognised mortgage institution, as it demonstrates that they are well qualified to receive financing and are serious about buying a house.

PRE-APPROVAL PROCESS

Pre-approval is a service that is offered, free of charge, at JN Bank and by other mortgage institutions. The pre-approval process is quite simple, it entails providing your income details and outlining any existing debt you may have.

"We will then determine how much you can afford to borrow and present you with a pre-approval letter, along with a checklist of documents which will be required for the loan application. With this letter, you will be ready to shop around for property and find yourself in a better position to negotiate with your realtor or vendor," Miss James outlined.

A pre-approval is based on the documentation the borrower supplies at the time of application.

REQUIRED DOCUMENTS

These documents include copies of driver's licence and birth certificate or passport; Tax Registration Number; proof of address; income verification letter; last two payslips; and completion of the credit report forms and statement of affairs.

Persons residing overseas will also require a credit report, which should include their credit score. It should also be noted that prospective homebuyers can join with other persons to purchase a property; and that similar documents will be required for the other party or parties.

Once the mortgage department at JN Bank is in receipt of the pre-approval documents, an assessment will be carried out, and subsequently, the pre-approval letter is issued. The letter

will include the sum the homebuyer is pre-approved for, the interest rate, the term and the monthly payment. The prospective homebuyer can now present this letter to their realtor or vendor, to start their negotiations.

The preapproval letter is usually valid for up to three months.

At the end of that period, if the buyer has not found a property they wish to purchase, they will be required to reapply for a new pre-approval letter.