Buying a house and taking on a home loan is a massive decision but an exciting one as well! Once you’ve committed to searching for your dream home, your next step should be to get your home-loan pre-approved. So before you start house hunting and planning a housewarming, make sure all your affairs are in order.
By taking care of this massive financial commitment, you will save yourself a lot of stress down the road and have a clearer picture of what you can afford. With knowledge of all the ins and outs of the process, we have helped thousands of Kiwis through this journey; helping them through the front door of their dream home.
Your deposit matters.
The size of the deposit you have saved up will be a major determinant of your ability to get pre-approval. The bigger the deposit, the more favourable the lender or bank will view your application. Particularly if your deposit is larger than the minimum 20% required.
As part of the application, the lender or bank will seek proof of this deposit. This will be in the form of either a bank statement, KiwiSaver first home withdrawal balance estimate or a proof of gifted funds.
Do you have a clean credit history?
What’s your credit score? During the application process, lenders will use your credit history has a strong indicator of your ability to manage a home loan.
Lenders can reject your application if they deem your credit history to be unsatisfactory. There are four main areas they will investigate: outstanding defaults, paid defaults, amount of enquiries for credit and number of companies approached for credit.
In order to save the heartache of having your application declined because of previous behaviours, we strongly advise you are aware of your credit score before applying and have at least a ‘clean’ six months of being debt free before you apply.
Having a clean account history.
As part of your application, you will be required to provide a detailed history of all your accounts. Lenders will investigate every aspect of your account history and how well you manage it. This will include all current or previous debt, savings, dishonours or unauthorised overdrafts.
Having a clean history will drastically improve your application, as it will show the lender that you have the ability to manage your finances and repayments.
Make sure your debt is under control.
Lenders will require detailed information regarding any outstanding debts you may have. The less debt you possess, the higher the likelihood of getting your pre-approval! Lenders will require detailed information about any outstanding debts, including how long you’ve been in debt and the amount left to pay.
It’s critical that you get any debt under control before you apply for pre-approval, success will be very unlikely if you have excessive or unjustified debt. If you are struggling to get on top of your debt to become an attractive lender, get in touch and we’ll see what we can do to help you improve your application status.
Do you operate with a surplus?
As part of the account history check, lenders are also likely to analyse the relationship between your income and expenses. They will require proof of current households income and expenses, allowing them to gauge your position once all expenses are paid. From this, they will determine if your financial position is stable enough to manage new mortgage repayments.
So ensuring that you are in the black more than in the red will dramatically increase your attractiveness.
What is your employment history like?
A massive aspect of getting a pre-approval is your ability to demonstrate a stable long-term employment history. Lenders will analyse how long you’ve been employed at your current job and previous employment. From this, they will make a judgement on whether you’re likely to chop and change regularly to determine whether you are a stable or volatile lender.
Every lender will require you to have a consistent source of income to maintain your repayments. Evidence of employment in the form of your last three income statements, or if you’re self-employed financial transaction from at least one full fiscal year will be required.
Trying to obtain a mortgage when you’re self-employed can be a challenge. Give us a call and we’ll help you navigate the process.
Are you the saving type?
Have you got a nice little nest egg tucked away somewhere out back? If you do, this will definitely make you more attractive to lenders. As part of your account check, most lenders will analyse your ability to save.
By demonstrating a regular and consistent savings history, you’ll be showing lenders that you have the ability to manage your finances accordingly.
At The Mortgage Supply Company, we are determined to help Kiwis navigate the home loan process and move into their dream home. Possessing a wealth of knowledge and experience, our friendly advisers are able to help you and your family find the perfect home loan that suits your lifestyle.
In order to find out how we can help you, contact us today.
CONTACT COLIN TODAY
027 643 5454