Buying a home will probably be one of your biggest financial commitments. There are documents that you will need to prepare in order to get pre-approval from a bank. Lending criteria differs between banks so some banks may like your application while others may not. Below is a list of what the banks will ask for.
- An application form needs to be completed which will include your statement of position. A statement of position consists of your monthly Income and Expenses, your assets and liabilities.
- 3 months bank statements and 3 months credit card statements
- 6 months loan instalments, (of any other mortgages you may have)
- 2 payslips
- Identification (passport or driving licence)
- Proof of current address (utility bill)
- 2 years financials (self employed)
- Proof of deposit
In the months leading up to your application try and keep good account conduct (do not go into overdraft). If you can, pay your credit cards in full each month and do not pick up more debt.
The banks need to see that you can manage your financial affairs and have a reasonable track record of savings which can include Kiwisaver. With a house there comes a lot more added cost then a rental property;
- General maintenance and upkeep
- Insurance
- Rates
Work out a budget so you know that you are not over extending yourself. This is something that the budgeting service, an accountant or a financial adviser can assist with however it is basically taking all your costs away from your income. When looking at mortgage repayments it pays to put in slightly higher rates then are current to see if you can manage with a rise in interest rates.
Once your mortgage has been approved there may be conditions to finance. If lending is high the bank will require a registered valuation. Again this varies between different banks but it tends to be required for anything above 80% lending. The lender also has to like the property; Is the building up to their standard? A big issue we are finding with banks are their dislike for properties with consent issues. At the end of the day even with a pre-approval for finance in place you must always put the subject to finance clause in. Once you have found a property you would like to put an offer on, legal advice should be sought straight away. We have a number of fantastic lawyers and valuers on the island that can help at this point and it pays to use local.
It’s prudent to have pre approval in place. I tell clients all the time that just come in and have pre approval so that you are ready to buy a property when you find one you like. You don’t have to use the pre-approval however it is open for 180 days and is normally subject to conditions which are dependent on the property that you are purchasing. Once the property is purchased it is important to get the right advice on how to structure the property. Happy House Hunting!
