• Mon. Sep 25th, 2023

What Banks Look For when Borrowing for Real Estate

UGANDA, Kampala | Real Muloodi News | The first thing many Ugandans do when they land a decent job is start saving towards the dream of one day buying real estate.

However, most of us need some financial help to be able to execute that dream, and therefore will eventually turn to banks or other financial institutions for a loan or mortgage.

While saving is important, it is equally important to know and start preparing for what lenders look for when it comes time to borrow, to increase your chances of getting the loan when you are ready to buy that land or property.

What Banks Need

Every banking institution has different banking requirements, but there are general requirements that real estate buyers should be aware of.

Joseph Mutaka, the Principal Banking Officer at Bank of Uganda says real estate buyers should plan for the five Cs of credit.

The five Cs of credit offer lenders a framework to evaluate a loan applicant’s creditworthiness. By considering a borrower’s character, capacity to make payments, economic conditions and available capital and collateral, banks and other financial institutions can better understand the risk a borrower possess.


A lender will look at a mortgage applicant’s overall trustworthiness, integrity and ethical standing and credibility to determine the borrower’s character.

The purpose of this is to determine whether the applicant is responsible and likely to make on-time payments on loans and other debts.

To evaluate your character, the bank will look at your credit history not only with itself, but other creditors including other banks, SACCOs, money lenders, utility providers, and even landlords.

“We expect you to access financing through the bank. Banks expect you to have a bank account which calls for a clean record. Everybody who gives you money will need to understand your character, “Mutaka says.

Real Muloodi News explains in detail everything you need to know about your ‘credit history’ and your ‘credit score’ and what you can do to improve yours in this related article HERE.


Capacity summarises a home buyer’s ability to repay a loan mortgage based on the applicant’s available cash flow.

Relevant factors lenders consider include the borrower’s income and income stability.

If you are gainfully employed, lenders will consider how long you have been employed and how much you earn, and will need evidence to verify this, such as the most recent payslips from your employer.

If you have your own business, you will need to show evidence of your assets, liabilities and cashflow. Banks will want to verify this information with your tax returns to URA and other evidence.


Whether you’re applying for a business loan, mortgage or other loan, lenders want to see that you’re committed enough to contribute some of your own funds.

Most mortgages will finance up to 80% of the cost of the property, while lenders will expect you to contribute a minimum of 20% of your own money. The more you can contribute, the higher your changes of getting the loan.

Mutaka says: “The bank would like to see what investment you will make personally. Therefore, the bank will be interested in assessing how much capital you can put in as an individual.”


Lenders generally look at other financial conditions like the overall health of the economy and specifics of the loan. This typically includes the loan interest rate, amount of principal, and the value of the real estate asset being purchased.

However, lenders also consider outside factors like the state of the economy as a whole, industry trends and other conditions that might impact loan repayment. Covid-related lockdowns is one example of an outside factor that impacted many mortgages.


The banks will need some form of security for the loan, which in most cases will be the property you are intending to purchase. Although, the equity in a property you already have can be used as collateral that you can borrow against to buy another property.

In any case, they will need an asset you can pledge to them.

“They are not interested in taking your asset, no, it is just a cover up to show that they gave you their money and you have something that entices you to come back to them,” Mutaka explains.

Summing up

By considering a borrower’s character, capacity to make payments, economic conditions and available capital and collateral, banks and other financial institutions can better understand the risk a borrower possess.

We highly recommend the two articles listed below which go into a lot more depth on what you can do to prepare for your future mortgage.


Landlords Can Now Register their Tenants’ Credit History

Need a Home Loan? How to Establish Credit Worthiness