I recently applied for a home loan and had to supply three months’ salary slips. Why is that?
WHEN you apply for a home loan, the first step is a credit application with a bank or credit provider.
This application process is tightly regulated by the Natio-nal Credit Act and requires an assortment of information to be provided in order to allow the credit provider the opportunity to evaluate your credit profile and conduct an affordability assessment – in short, establish whether you are in a position to afford the loan and manage all of your personal debt obligations.
From the credit provider’s perspective, they also need to satisfy themselves that they are prepared to risk financing your home loan and that you will be able to pay your monthly instalments on time and for the duration of the loan.
The credit provider’s assessment of your credit profile will therefore dictate whether it will afford you a home loan or not.
However, the recent National Credit Regulations and affordability assessment criteria which came into effect on 13 March this year imposes stricter requirements on credit provi-ders regarding the information required for conducting affordability assessments.
Among others three months’ payslips or three months’ financial statements are now required to show salary deposits or other sources of income.
Not only does it increase the obligation on the consumer to provide proof of its income, but it also helps standardise the information required for an affordability assessment across all credit providers.
As a consumer, one should therefore get used to this type of information being required – and be ready to provide the necessary.
Be prepared as well that your credit history – your repayment history on a credit card, vehicle loan, cell phone contract et cetera – can also play a role when a home loan application is being considered.
Therefore, get the right documents ready and be financially responsible so you can show in your credit application and credit history that you can afford the repayments and have a record of managing your debt responsibly.
S Stacey Bartlett, associate, Phatshoane Henney Attorneys