Dos and don’ts that will help your bond application get the green light

Before you start looking for your dream home or next investment, you need to make sure that you have everything in place to secure the bond that you need. Here are some important dos and don’ts that will help your bond application get the green light.

Do: plan ahead and get pre-approved

Improve your chances of getting a green light on your bond by first seeking pre-approval. The approval rate for clients who first get pre-approved through BetterBond is 95% of all applications submitted on their behalf. Pre-approval can be done online, at any time and at no cost.

The process is simple and the added benefit is that a buyer submits the same documents as they would for a bond application. This means that all the information is stored on an applicant's profile, and will be used for the bond application as well if done within three months of pre-approval. Pre-approval not only improves your chances of getting a bond, it also speeds up the application process. 

Furthermore, it gives you a good idea of what you can spend which means that you can make a firm offer to purchase (OTP) when you are ready to buy. This counts in your favour with the seller and makes it more likely that they will accept your OTP. A pre-approval certificate is valid for 90 days. While it is not a guarantee that the bank will approve your bond application, it provides an indication of what you can afford and what banks will lend based on your income and expenses. 

Do: pay a deposit

Being able to pay a deposit on your home will also increase your chances of securing a bond. The higher the deposit, the better your chance of securing a bond. It sends a message to the banks that you have a lower lending risk. This means that they are also more likely to offer a lower interest rate. It also sends a strong message to the seller of a property that you are a serious buyer with the financial means to honour your OTP. 

Do: work with experts

Working with a bond originator improves your chances of successfully applying for a bond. A bond originator will manage the entire process, from pre-approval to writing loan motivations and submitting applications to multiple banks. Reams of paperwork can be daunting. However, by consulting a bond originator who manages the entire process, you remove this administrative hassle. Also, by approaching more than one bank, a bond originator can secure a more favourable interest rate. 

A bond originator will also advise on possible issues that could count against you when applying for a bond. Usually, the bond originator will identify and deal with these issues before the application process even starts.

Furthermore, BetterBond can help you apply for a First Home Finance subsidy, as long as you fit the criteria. 

Don’t: guess your credit score

Having a good credit status will improve your chances of securing a bond. Get a copy of your credit score from the credit bureau so that you have a good idea of your financial standing. 

Don’t: mismanage your credit

While some credit is good – because it shows financial institutions that you can manage credit – make sure you don’t have any late or missed payments that could have an adverse effect on your credit rating.

Don’t: allow your credit card debt to get too high

Try to avoid unnecessary credit if you are applying for a bond. Banks will look at your credit cards as collective debt. This applies to store accounts as well. 

If you’ve applied for several accounts or loans in a short space of time before applying for a bond it could count against you. While it is good to know your credit score, too many queries from creditors could also be a red flag for banks. 

Don’t: leave getting the right documents together to the last minute

Make sure you have all your personal and financial information ready. This includes recent bank statements, proof of income and a letter from an auditor confirming your personal income if you are self-employed.

Don’t: estimate your affordability

Part of the consideration of your bond application includes a review of your monthly income and expenses. Affordability is a fundamental aspect of applying for a bond. Make use of BetterBond’s online affordability calculator to work on whether you can afford a monthly bond repayment based on our monthly income. The accepted rule of thumb is that your bond should be no more than 30% of monthly income. 

A bond pre-approval certificate will include the highest purchase price you can afford. It will also include your possible bond repayments based on various interest rate and deposit calculations. This does not mean you need to apply for a bond based on this figure. Evaluate market conditions. If interest rates are in an upward cycle, rather apply for a smaller bond that you know you could afford if interest rates changed.

Don’t: misrepresent information on your bond application

Being untruthful when completing your bond application is fraud. This includes exaggerating your monthly income, leaving out information about your expenses and debt or being dishonest about your employment record. If you are still hoping for a bond, a bank can reject your application with immediate effect. This will have a detrimental effect on future applications with the bank. They may refuse to consider your application. Alternatively, they may charge a higher interest rate because you are now a high risk applicant. If the bond has already been approved, a bank may cancel the home loan and institute criminal charges. 

Buying a home is a long-term investment that involves careful consideration and planning. By working with an expert who can guide you through the process and flag possible problems before they become obstacles on your homeownership journey, you have a far greater chance of success when applying for a bond.