8 Things Your Mortgage Broker Wants You To Know

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For many potential First Home Buyers, the current market climate is looking pretty appealing. With interest rates extremely low we’ve seen a definite step forward by those wanting to get on the property ladder.

As you would have heard us mention before, the key to getting that Home Loan approved is making sure you have ‘all your ducks in a row’ so we can present your application in a way that the banks have no choice but to say ‘APPROVED’

Below are 8 things that you can do to make sure your put your right foot forward, and give yourself the greatest chance of getting that first home loan.

 

avoid short term debt

Having a number of small loans whatever the size, can set off alarms bells for Bankers. It suggests that you may not be very disciplined with your finances or maybe you're unable to save for the items you need, even perhaps struggling on your current income level.

It also affects the amount you can borrow for a home loan. The higher your short-term debt, the less you can borrow. As First Home Buyers this can have a significant impact on factors like the location, size, and quality of the home you can purchase.

 

REDUCE YOUR CREDIT CARD LIMITS

Do you have a $10,000 limit on your credit card, but you only use $2,000 each month, and ALWAYS pay if off in full?

This is an excellent way to use your credit card but when a bank is assessing your loan, they will calculate your debt servicing ability based on the limit of your credit card NOT how much of the limit you use. So, by lowering the limit you automatically increase the amount you can potentially borrow. It's as simple as that.

 

KNOW YOUR INCOME

No matter if you are an employee, business owner or self-employed it is critical you know your numbers. Yes, we can see how much is going into your bank account each week, but how much is going to your Superannuation? Do you have other amounts being deducted prior to the money hitting your account?

The best way to confirm your income is by having your three most recent payslips available to support your application. Even better, if you can provide a contract or a letter from your employer confirming your income, bonus structures etc. your Mortgage Broker has the evidence to prove you earn more than is actually just coming into your bank account. And you guessed it ... the more income you can show the more you can potentially borrow. Even more importantly, the more comfortable the bank will be in your ability to make ongoing repayments. 

If you are self employed the key is to know and have proof of, not only your turnover but also your profit. Up to date financial information prepared by your Accountant is vital – providing last years financials will often not be enough Banks want to know how your business is going now.

 

CREDIT CHECK YOURSELF

You’d be surprised at the number of clients that get a nasty surprise when the banks come back questioning their credit checks. It’s not unusual that the first mobile phone plan you had, or the electricity bill your name was on when you were at University, may come back to haunt you.

You could've simply not been aware of these things or perhaps they were put in the too hard basket at the time. Whatever the case, they can cause a road block when it comes to getting your first home loan.

To avoid any potential embarrassment, it can be a good idea to do a credit check of your own, so you can clear any unexpected items up before going to the bank.

For more information on doing your own credit check click on the link below

https://www.govt.nz/browse/consumer-rights-and-complaints/debt-and-credit-records/check-your-own-credit-report/

 

KNOW HOW SECURE YOUR INCOME IS

With recent world events, in particular Covid-19, banks are paying more attention on the impact these sorts of events may have on your income and ability to make loan repayments.

Are your wages currently subsidized? Do you have other sources of income? Do you share your expenses with others in the household?

Knowing how your income may be impacted, and having a solution for how you will manage your finances to ensure you can continue to meet repayments is important at this time. Your mortgage broker needs to be able to assure the bank that you are a good 'risk' to take - that you will be able to meet your financial obligations no matter the situation.

 

rEMEMBER YOUR 1ST HOME WILL NOT BE YOUR LAST

It can be tempting to borrow as much as you can to obtain the home of your dreams. Unfortunately, this isn’t overly realistic when securing your first home, and can put a lot of strain on your finances & your relationships.

Think of your first home as short term, an opportunity to get yourself on the property ladder, build up some equity, and then take your next step up the ladder as the opportunity arises. No use having a big house with all the bell & whistles if you can’t afford to go out and enjoy yourself from time to time, or undertake maintenance to keep you property in good condition. 

 

KEEP YOUR OPTIONS OPEN

It can be tempting if you have a great relationship with your banker to go directly to them for your home loan. But what if that bank doesn’t have an appetite for First Home Buyers at the moment?   Or has tougher lending criteria than others?

Then you’ll be back to shopping around. Which means more hits on your credit check (which banks don’t like to see), more of YOUR time spent completing the different banks application forms, and even more time explaining your situation over & over again.

This is where a mortgage brokers expertise comes into play. They know what is going on in the market with the different lenders. They can make sure your applications are presented to a bank that fits your situation, paints you in the best light, and where it's most likely to be approved.  

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