Thinking about buying your first home?
Chances are you’ve heard in the media that it’s getting harder to get approved for lending. Recent changes mean that things have, yes, gotten harder, but are still far from impossible for most Kiwis. Sometimes just a little advance planning is needed first.
In order to have the best chance of getting a loan with a bank, it’s important to prove that you are a savvy saver and can manage your money (and therefore most importantly, show the bank you can make your repayments!)
Here are a few of our best tips for getting mortgage ready (even if you aren’t quite ready to buy yet!)
Ensure your account conduct is clean.
This means visibly proving that you can make the mortgage repayments and showing your spending habits. This means not going into unarranged overdrafts, and showing that you are organised with your money, through well-laid out bank accounts. If your weekly mortgage repayments will be $400 and you currently have $350 going out on rent, and are saving $100 towards your deposit per week, then this clearly proves you can match your repayments - this is what banks like to see!
Reduce your credit card
Banks consider credit cards as an expense - even if the balance is nil and you repay them on time. If you have a $5,000 limit, to a bank this means you are able to spend up to this limit and therefore that’s a risk. It’s a good idea to pay off your credit cards as soon as possible, and then reduce the limit to as low as you possibly can go.
Know what you are spending
Many people don’t actually keep track of what they spend in a week or a month. This means that many people spend far more than they realise, and often on stuff that might not be really needed. Keeping track of your money on a weekly basis allows you to see where exactly it’s going, and also how you might be able to cut back - money which could then be saved towards a deposit, or go towards a mortgage.
Know your spending must-haves
Once you know what you are spending, you can also work out what you can’t do without. This will help in your application for a mortgage, as you will be able to clearly state your various non-negotiable expenses. This puts you in a better and clearer position when it comes to knowing how much you can realistically spend on mortgage repayments.
Three months is the rule
Generally banks like to see three months of clean and clear accounts and this is what they base their assessment on. It means if you are looking to buy a home, it’s a good idea to be thinking at least three months in advance. If you aren’t sure if your accounts look okay, a mortgage advisor can look over them for any red flags that the banks might spot.
If you are looking to buy a home in the next few months, or even in 2023, then we recommend you get in touch with Better Choice Home Loans as soon as possible. We work with buyers to get them mortgage-ready, so even if a house purchase isn’t quite on the horizon just yet, we can help you get into the best possible position to maximise your chances.