Wednesday, 7 March 2012

Home loans for the self employed!

Self employed home loans

The one sector that is grappling to come to terms with the tighter lending criteria policies adopted by the banks is the self employed.  It seems those who work for  companies are able to get loans while those who pay the salaries are not. Although this is illogical, the banks say the consumers in this sector are regarded as a higher risk. Self-employed applicants tend to be viewed as a higher risk than employed applicants, due to the perceived instability in income of these individuals, particularly in these challenging economic times. It is relatively straight forward to confirm the monthly earnings of salaried applicants; the same can't be said for those who are self-employed.

According to the banks self employed consumers are generally more exposed to negative market conditions and this may have a high impact on the sustainability of their earning ability. Recently they have seen an increased level of default in this customer segment. This has led the banks to mitigate this risk through appropriate application selection criteria.
Advice to the self employed consumers is that though the banks are now stricter than before, they are still lending.

Important things to note when making an application:
Credit Record - This is where most people fall short with their mortgage applications. Before approaching your bank for a mortgage loan always check out your credit profile before applying. You can do this at the major Credit Bureaus, ITC Transunion and Experian – they may charge you for the credit report, but it is well worth the expense. Where a creditor has obtained a default / judgment against your name you will have to pay the debt in full and contact ITC for the rescission of the default / judgment. Slow payments also have a negative impact on your credit scoring. Always pay you accounts on time or before the due date to avoid this. Second thing is affordability; speak to your bank or a bond originator to check how much you qualify for. When you do the affordability calculation it is important to be truthful about your income as this affects your application. 

Lastly but most importantly; make sure you have all the relevant documents required and do not cut corners because you will be declined. Depending on the bank, they require 2 to 3 years audited financials, 6 to 12 months bank statements (business and personal and stamped for authenticity), signed Assets and liabilities, signed income and expenditure, signed letter of income from the auditors, company docs, and projected cash flows. I would say that even though the banks are strict company's such as Global Fundi will assist you or help you find a bond originator who cares. There is still hope even under these circumstances. 

Lindy Z.


Anonymous said...

but this does make sense. When the self employed hit bad times, they go into debt. When a employee of a business is retrenched, they will start to find a new job.


kwikcash said...

Loans are a great way to get cash easily when you are in a touch and they are accessible from several different loan companies because of rivalry. Generally, there are so many loan companies out there competitive for a restricted business that you are likely to find several who are willing to provide you a history of credit score at any given time.

CVGi said...

Real estate sector was already on a boom, and people were just dying to purchase the house of their dream… the trend is now increased with many financial institutions entered in the market with candy offers…

You think about purchasing the home, and leave rest on them. They are always there to help you out whenever you need them… really??? Thing twice before getting stuck into any such matter, because it may cost you a lot. Go for a loan only if you need it desperately. Otherwise you may have to face many problems in long term…

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Jaco Viljoen said...

I am in the real estate business and I cringe when I have a self employed client, getting finance is possible but a nightmare and from my experience most small business owners don't have all their ducks in a row and need to get these documents prepared and often the contracts expire before an application has even gone in to the bank.