Top Tips on how to make the bank say YES!
20 February 2019
If you are considering buying your first home sometime soon then it is worth brushing up on your mortgage knowledge!
Learn what you can do to make yourself the best possible candidate, and learn what the banks want and learn the best way to make the mortgage work for you.
Having good account conduct is extremely important when buying a house. You may ask “Why does this matter?“ Or say “I will stop spending so much once I have a mortgage”. You may be able to do this, but the fact of the matter is that the banks have obligations under the responsible lending code to make sure that you can sustain the repayments. If you constantly overdraw your account it suggests that you are living outside your means and this is a red flag to the bank.
Having good credit is essential when applying for a mortgage, the banks are taking a risk in lending you a large sum of money so having good credit is paramount.
Get account smart!
Banks are looking deeper into when and where we spend our money. To help with your approval, start putting these tips into practice.
~ Show proof of regular savings
In order to purchase your home you will need 20% deposit on average. This is not always the case which is where having a broker can help, they can navigate you through these somewhat murky waters and walk you through your options. There are also other options for first home buyers or new builds but these all come with their own set of conditions. ( Check out our other blogs to find out what ) If the bank can see that you have consistently saved your surplus income it will show them that you are capable of managing your funds which is extremely valuable. The bigger the deposit, the bigger your chances are of getting approved!
~ Cut unnecessary spending
The banks credit accessors will look through your accounts to see where you spend your money. If you have a habit of online shopping, getting takeaways 4 times a week or have multiple subscriptions it will be in your best interest to reduce this dramatically.
~ Reduce credit card/ personal loans debts
If you have a credit card with a high limit it is worth reducing it or even consider closing the account. Banks look at the total limit as a risk. If you have a credit card with $10k limit but only use $1k then reduce it to $1k as they consider the full $10k as a liability and it affects your total borrowing capability. A portion of your monthly income will be allocated to the repayment of the credit card.
If you have items on HP such as furniture, vehicles etc try to reduce the amount owning or repay in full. The less you owe, the more you can potentially borrow.
If you find yourself in the situation where you do have bad credit, there are ways to remedy this.
~ Plan your payments.
Arrange for all of your automatic payments to come out the day after pay day, this way you will not have the opportunity to spend money that was allocated to something else. Also set up an automatic payment from your daily account to your savings account.
~ Apply for an overdraft with your bank.
There are occasions where we get a bill that we did not foresee ie, the car breaks down and needs repair work, or you chip a tooth and need to go to the dentist. If you have an arranged overdraft you can access these funds without it affecting your account conduct, whereas if you simply went into overdraft it could be a black mark on your account.
Talk to a Mortgage Adviser.
It is never too early to talk to a broker, they can give you advise on the steps best suited for you. They know the ins and outs of the different bank policies and which bank will be the best for you and your situation. They can also help with getting you a pre-approval, this will give you more negotiating power when you do find the home that you are looking for. You will be considered a cash buyer who won’t have conditions attached to their offer which is much more appealing to the seller.
To put it simple. Money in = Good :) Money out = Bad :(
For more help with your home loan approval get in touch with us today to see how we can help.
Category: Finance Mortgage Broker Broker Kiwisaver First Home Buyers Mortgage
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