Buying a home is one of the biggest moves and exciting things you will do in your life. For many, the odds are that they will need a mortgage to finance the purchase.
The process of applying for a mortgage or a home loan for the first time can be nerve-wracking. There are many requirements, tasks, and steps that you must consider to help avoid costly mistakes.
The good news is that whether you have no idea about home loans or little knowledge about the process, you will get to know the step by step for acquiring a mortgage in Ghana, the financial institution to consider, and what you should expect.
What is a mortgage?
A mortgage is a type of loan that an individual receives from a bank or a mortgage lender that enables the individual to buy a home or a property. This loan implies that the individual is expected to pay back the loan amount over an agreed time. In most cases, the lender or mortgage bank uses the value of the property as secured collateral. The collateral is lifted if the mortgage amount and interest are paid.
The Process of applying for a mortgage in Ghana
So let’s assume you are ready to apply for a mortgage. The first thing to consider is that the mortgage loan is made available for resident and non-resident Ghanaians. Therefore, the loan can be in Ghana Cedis or Dollars.
Now, these are the things you must do;
Research your desired property and make an offer
It is important to take time to search for the property you want. Today, you can walk to any developer with a credible track record and choose your property type from the residential projects.
For instance, many people have walked into Eden Heights development just to get their desired apartment. The management of Eden Heights has lenders and financial institutions that they work with directly, and that can ease your stress of looking for lenders.
In this technological era, many developers have listed their properties on various websites and portals. The aim is to assist homebuyers to find their desired property. But it is advisable to do a property visit to know exactly the property you are about to invest in.
After the research, you can get an offer from the developer for your property. Depending on whether you are an expatriate or resident, pay attention to the lease term for the properties that the developers have built.
Research your Mortgage Lender and their mortgage types
The credibility of the lender or bank is important to help acquire your dream home. Take time and undertake background research to ascertain the credibility of the lender. This is to prevent potential homeowners from getting involved in scams.
Check with Ghana Property Finder to get a credible lender.
Again, look out for the financial status of the lender. This is equally crucial in the determination of the mortgage or home loan.
Also, know that lenders have different mortgage offers. So, make sure you know exactly the mortgage type you want. Usually, for first-time homebuyers, the outright purchase will be their goal. However, research thoroughly.
Get your documents ready
The lender you settle on will need your documents to facilitate your mortgage process.
The document that you will need to present include bank statements, credit history, rental history, and assets and debts. Remember the document needed varies depending on the mortgage loan you are going for as well as the lender you are choosing.
Submit the application and review the lender’s offer
It is advisable to hire a legal person for professional advice whiles preparing to submit your application.
Once you are confident in your choice of a lender based on their terms and conditions, interest rate, loan cost, and fees to be charged, you can make a pick.
Wait for the loan to be processed
The lender will undertake due diligence, which is time-consuming. At this stage, you may be asked to verify or submit other documents. It is important to corporate with the lender. This helps fasten the mortgage process.
Close on the mortgage
Yes, this is your final stage to sign all the final paperwork for the issuance of the loan. Some of the documents to sign at this stage include the loan application form, mortgage note, deed of trust, title documents, certificate of occupancy and just to mention a few. It is important to have your legal person aid you in this process.
Lender’s criteria to qualify a borrower for mortgages in Ghana?
Once you are done with your process, let’s look at what the potential lenders will do to qualify you for the mortgage.
Please bear in mind that the process varies for different banks or mortgage lenders.
Yet, the first two-stage that the lender will undertake include;
The Pre-qualification stages
This stage is when the borrower’s financial health is assessed by the lender. Some of the items that are taken into consideration at this stage by the lender include, debts, income, assets, credit score and just to mention a few. This stage allows the lender to determine how much can be given to the borrower.
The pre-qualification stages vary with the lenders. However, the snapshots will require you to:
1. Proof of identification: Ghana card, Passport, and Driving license.
2. Letter of intent:
3. Applicant Age (18-55); The prospective tenant must not be below 18 and must not exceed the retirement age of 60.
4. Current bank statement
5. Personal guarantee of the applicant.
6. Property tenure ranges from 5-to 15 years
7. Requirement for Life insurance for the property
The Pre-approval stages
The stages focus more on the creditworthiness of the borrower. The documents at the pre-qualification stages are usually collected and reviewed. The borrower’s overall financial health is examined.
It is at this stage that the borrower is aware of the required interest rate to be charged.
Mortgage Lenders and their requirements in Ghana?
Now you are wondering where to find some trustworthy mortgage banks or lenders in Ghana?
Let me highlight some that you can consider acquiring a mortgage; Many other financial institutions such as Societe Generale Ghana, Omni Bank, Bond Financial Services, and Dalex Financing offer amazing home loan packages.
For instance, there are varying applicable interest rates from one lender to another.
The APR (Annual Percentage Rate) is effective and broader in measuring the cost of borrowing than the exact interest rate. The reason is that it encapsulates some costs such as insurance, processing or application fees, and brokerage fees among others. In 2019, data from the Bank of Ghana show a range of 18.7% to 31.7 % annual percentage rate (APR) on mortgages.
But the USD mortgage interest rates range in Ghana between 11%-12.5%. Ghana Cedi home loan rates typically range from 24%-31% per annum.
Again, there will be a need for a financial commitment from the borrower. The down payments usually range from 15-30 % of the value of the home, and the lender pays 70-85% for you. Nevertheless, these vary, and you can contact the bank for more clarification.
Each bank has its requirement. What is certain amongst them all is that you should be an income earner within 21-60 years. Yet, understand that the age requirement varies too.
Now you will be required to have some documents that will be needed in your application.
Don’t panic, let me take you through some of these documents that you might be asked to produce and how you can get them;
An offer letter: This letter is a written commitment the real estate developer issue to the buyer based on their expressed desire to buy the property. You simply get this document after you have agreed on your property type with the real estate developer such as Eden Heights.
Land title certificate: This document comes in the form of a legal certificate showing that you have the rights to the property. This document helps the lender understand existing liens, usage rights, easements, natural resource rights, and other rights on the property. You can register your land or property with the lands commission for one to be done for you.
Indenture: This simply means a written instrument that conveys an interest in real property. This seeks to make the real estate transaction legally bidding between the parties. It also signifies the transfer of legal title.
Site plan: It Is also referred to as a plot plan. It is an architectural document detailing all that you need to know about the property or a proposed structure on a property.
Building permit: This document is an approval from your local authorities to your contractor in determining their activities to construct or remodel a property. Usually, you need to apply for a building permit with your site plan and land title. However, expect other documents when you visit your local authorities.
Bill of quantity: These documents are usually prepared by professional quantity surveyors or a cost consultant. It entails quality and quantity of work with the cost component. This document is what contractors use when putting up a project. The document helps give a fair of the cost of the project or development.
Valuation report: This report is essential for some types of mortgages; therefore, it is prepared by certified value to access the market value of the property.
Home Insurance: Lenders expect the borrowers to have active insurance on the property. You can acquire this with a credible insurance firm in the country.
It is important to seek professional advice with the documents to avoid huge mistakes. If you are looking to apply for a mortgage, you can visit Ghana Property Finder to fill out one application form which will be sent to multiple mortgage companies in Ghana.
Source: Ghana Web
