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Home Loan In Kenya- How To Qualify For A Home Loan

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When you are looking to buy a house or own a home and you don’t have enough to fund it. You can take up a home loan in Kenya.

Home loan enables you to buy lands or build your dream house. Get your documents ready and be honest with every single detail. Have a consistent income. Then you are ready to take up a home loan.

We will take you through a home loan application and all you need to know.

What is a Home Loan?

Home loan is a loan designed to help individuals own a house or purchase and develop commercial properties.

It is a loan taken to purchase plots of land to rent out for commercial usage or private usage. With a home loan, you can become a landlord in a few years after repayments. 

General Features of a Home Loan

  1. Home loan is only for construction of a new house or purchase of a ready-to-move-in property
  2. Interest rate is low compared to mortgage 
  3. Typically, between 0.8% to 1.2% of the loan value
  4. Up to 30 years

Difference between home loan and mortgage loan

Home loan is a loan for buying or constructing of houses while,

Mortgage loans are loans taken against a property that the borrower already owns.

How do you qualify for a home loan?

To qualify for a home loan, you need:

  1. Credit score of at least 620 points and above 
  2. APR and DTI ratio should be less than or equal to 50% to qualify for a home loan.
  3. Have a consistent income flow
  4. Be ready and willing to reveal everything single truth and present all documents required. 

Credit score for a home loan

You need a credit score of 620 and above. It involves enormous sums and lenders are not ready to lose or give out their fund just like that. You need to have a good credit score to qualify. 

How to improve your home loan eligibility 

To improve your home loan eligibility:

  1. Check out for errors on your credit report 
  2. Ever ready to respond to your lender

How to get your home loan approved

Because of the enormous sum involved in home loans, lenders conduct strict observation and scrutiny before disbursements. To get your home loans approved, you need to;

  1. Be aware of your financial situations
  2. Make a higher down payment
  3. Have a good credit score
  4. You can use a co-applicant like your parents
  5. Keen details to application forms and documents.

Some home loan lenders in Kenya 

Some home loan providers in Kenya include:

  1. HF groups
  2. KCB
  3. NCBA Bank
  4. Stanbic Bank of Kenya

The HF groups 

They are private lenders that give out home loans in Kenya. 

Features

  1. Up to 90% financing of the selling price or value
  2. Maximum loan term of up to 20 years for employed individuals and 10 years for SMEs and groups
  3. Product is for outright purchase of a home

Benefits

  1. Our Home Loan provides you with an affordable way to buy a home with
  2. Loan repayment duration of up to 20 years for occupied homes there is tax relief for customers
  3. Mortgage protection cover in case of death or disability
  4. Includes insurance cover for fire

Requirements for Employed Persons

  1. National ID 
  2. Passport copies
  3. KRA PIN Copy
  4. 3 months payslips
  5. 6 month’s salary bank account statements
  6. Letter from employer

Requirements For Self-Employed Customers

  1. National ID
  2. Recent Passport photograph
  3. KRA PIN Certificate
  4. 3 years audited books of account
  5. 1 year bank statements
  6. Certified copy of partnership deeds (for partnerships) and Rental schedules (for landlords)

Fees & Rates

  1. Commitment Fee of 1.5%
  2. Valuation fee of approximately 0.5%
  3. Legal Fees of approximately 1-2%
  4. Stamp duty of 4%

KCB bank

The KCB is one of the biggest banks in Kenya, with a strong capital and assets base that provides a home loan.

KCB home loans features:

  1. Appraisal fees at 2.5% of loan amount
  2. Ledger fees of Kes 350 per month
  3. External Application Fees
  4. Mortgage Plus Fees
  5. Negotiation Fee of 2.5% of loan amount
  6. Ledger Fee of Kes 350 per month.
  7. Legal and valuation Fees
  8. Stamp duty at 4% of cost of property or value on the open market
  9. Stamp duty on charge at 0.1% of loan amount
  10. KCB can finance insurance premium
  11. Charges are not inclusive of tax

Visit their website to find out more about KCB KCB loans 

NCBA bank 

NCBA home loans features

  1. Competitive Mortgage interest rates
  2. Friendly loan terms
  3. Loan repayment periods of up to 25 years.

Features

  1. Mortgage loan facilities of the loan amount in local currency, 1.5% of the loan amount in foreign currency.
  2. They offer NCBA mortgage loans in Kenya Shillings, Dollars, Pounds, and Euros.
  3. 105% Financing of property value or market price, whichever is lower.
  4. Maximum term of up to 25 years.
  5. They calculate home loan Interest on a reducing balance basis.

Stanbic Bank home loans

Stanbic Bank home loan features:

  1. Up to 105% finance of properties below Kes. 20M
  2. Up to 100% of finance for construction of single residential houses below Kes. 20M
  3. Loan tenure–up to 20 years (240 months)
  4. Debt to income ratio–should not exceed 50% of net salary
  5. Minimum loan amount–Kes. 1M
  6. Minimum property value–Kes. 3M
  7. Free cover limit for loan amount Les. 30M and below
  8. Only available to salaried customers in local currency

Visit their website to read up more 

General requirements for a home loan

  1. A completed and signed mortgage application form.
  2. Your Original ID/Passport (plus copies)
  3. 6 months certified bank statement.
  4. 3 months’ pay slips.
  5. Sale agreement or letter of offer(for purchase mortgage only)
  6. Letter of introduction from an employer.

Benefits of home loans

Benefits of home loans include:

  1. Easy repayment 
  2. Mortgage cover
  3. Fire insurance cover from some lenders 
  4. Longer repayment duration 
  5. Tax relief from some financial lenders.

Simple ways to make easy repayment 

Ways to make easy repayment of home loans:

  1. Pay a down payment of over 20%
  2. Make a part payment
  3. Go for short tenor repayment duration 
  4. Choose a lender with low interest rate
  5. Never miss your monthly repayment 
  6. Take advantage of home tax exemption

How to repay home loans

There are general ways of repaying home loans. Different lenders have different ways of collecting their loan repayment. They include:

  1. Login or locate your M-Pesa account 
  2. Select paybill 
  3. Enter the business number
  4. Enter your phone number as your account number 
  5. Type in the amount you want to repay
  6. Enter M-Pesa pin
  7. Confirm details and press ok
  8. Repay your home loan

Note: you can also repay through your bank account. By writing a standing order to your bank or transferring directly to the lender’s account. 

Conclusion

During the home loan application process, it is pertinent that you reveal all information which applies to your personality. Be true with it. Know what you are going for and every single detail. If not, they might reject your Home Loan application. If you are not sure about your eligibility, you can use Home Loan Eligibility Calculator to avoid Home Loan rejections.