Every journey begins with the first steps and the result you get has a lot to do with the direction of those steps.
As mortgage advisers we have helped a lot of first home buyers.
You may be able to buy your first home right now, or in many cases there may be some things that need to be done before you are ready – or at least before you are able to get the best home loan.
What Banks Look For From First Home Buyers
Banks typically look at a few key things;
Deposits – the general rule is the banks want you to have a 20% deposit; however as mortgage advisers we can source mortgages for people who have less than this from both banks and non-bank lenders. Sometimes these are called low deposit mortgages but with house prices these days you sill may have a large deposit saved, but not quite 20%. The reason that banks want a 20% deposit is due to the LVR rules that The Reserve Bank has introduced; however banks are able to do a reasonable amount of home loan lending when there is a lower deposit, and those rules do not even apply when you are buying or building a brand new house.
Banks and non bank lenders can offer low deposit home loans.
CLICK HERE to find out more about the deposits.
Income – any lender needs to be comfortable that you can afford the mortgage repayments.
They do this by (1) looking at your income and assessing how stable it is (in their eyes), (2) reviewing your declared expenses compared to the banks assumptions and then (3) calculating the mortgage repayments at a rate higher than the current rate.
It is important to ensure that all income can be used.
Even a flatmate or boarder can make a difference.
Credit History – in New Zealand most banks and non-bank lenders will rely on your Veda credit report which shows a credit score for you.
The more enquiries and changes of address will lower your score as will any payment defaults and if your score is too low then many banks will not offer finance which means you will need to go to a non-standard mortgage with one of the banks or non-bank lenders.
You can check your own credit score using Credit Simple.
Bank Account Conduct – before a lender approves your loan they will review your last 3-months transnational accounts.
They are looking to ensure that you have disclosed all debts and other financial commitments, but they are also looking at how you manage your bank accounts. We see a lot of home loan applications declined due to poor account conduct.
Statement of Position – the bank will look at what assets and liabilities you have. High levels of short-term debt will have a negative impact in two ways – (1) the banks need to factor in the repayments that you pay and (2) the banks do not like too many separate loans.
As mortgage advisers we look at the same things that the banks do before any application is sent to the bank, and therefore we can address anything that could be problematic.
Your First Steps
The first steps are to;
- Establish you current financial situation
- Make any necessary changes
- Prepare and submit a finance application to the bank or non-bank lender for a pre-approval
- Then start looking for a suitable new home
Contact us today and we can discuss how we can help make the process easier for you.
