Guide to home buying for the self-employed

"This is not to say that getting home finance will be impossible," says Yvonne Viljoen, property finance consultant at ooba, South Africa's bond originator. "But it does mean that you will have to deal with more paperwork than employed applicants, and you'll probably come under closer scrutiny from your bank."

Paperwork

Whether you are a freelancer, contract worker, sole proprietor or small business owner, Viljoen says you will need to present the following documents with your application:

• Comparative financials covering a trading or working period of the latest two years,
  
• Letter from your auditor confirming personal income,
  
• If your financials are more than six months old, you will need up-to-date signed management accounts,
  
• Cash flow forecast for the ensuing 12 months,
  
• Personal statement of assets and liabilities,
  
• Personal and business bank statements (Absa requires the latest 12 months, the other banks require six),
  
• Latest IT34 , which is confirmation from SARS that your tax affairs are in order,
  
• Company, CC or Trust statutory documents, and
  
• ID documents for all the directors, members or trustees.

This is a long and daunting list, but your accountant or bookkeeper should be able to help you out with most of these forms. Depending on the complexity of your application, Viljoen says it may also be useful to provide a short CV, and it is imperative to have your tax affairs and finances in order and up to date. She also advises separating personal and business expenses.

"Using the services of an expert bond originator like ooba is extremely helpful, especially to self-employed buyers," she says. "A bond originator will apply to multiple banks on your behalf and present your application in the best possible light. This means that you only have to fill the paperwork out once, and if you are uncertain of anything, you can get advice from experts who know the system - at no extra cost to you."

Boost your chances

To increase your chances of having your home loan approved, Viljoen advises that you do the same things that any prospective home buyer does to ensure their financial affairs are in order.

"The first thing that a bank will do is run a credit check, so you should do one yourself, before you are actually making an offer on a property and time is of the essence," she says. "All South Africans are entitled to run one free credit check a year."

If there are any judgements against your name, it is possible in some cases to rehabilitate your record, so get expert advice on how to do this.

However, your credit record is only a small part of your general creditworthiness, so it's a good idea to make sure you have a proven history of managing your finances responsibly. "It's a sad truth that you can't get big credit until you've had small credit," says Viljoen. "So open a couple of accounts with stores and get a credit card, then make purchases and pay what you owe on time and in full every month."

Obviously, your financial records will show whether you earn enough to afford the property that you want to buy, so it's a good idea to manage your income and expenses carefully in the months or even years leading up to buying a home. "Banks like to see regular, consistent income, and also look for sufficient disposable income or monthly savings to afford your property," says Viljoen.

It's also useful to get pre-qualified for a home loan - which means that your income, expenditure and credit record has been checked in advance - so that you can make an offer on a property with the confidence that it is within your price range, and that your credit record is clean.

And finally, Viljoen adds that saving up for a deposit will provide an enormous boost to your bond approval chances, indicating that you are financially responsible, have the funds to put towards the house and making the home loan a less risky proposition for the bank.

"Buying a home and applying for a bond can be a stressful and confusing time," says Viljoen. "Take heart in the fact that with a clean credit record and the correct paperwork in place, there's a good chance that the banks will look favourably on your application."