In my previous blog, I have covered off some of the reasons banks decline home loans. But how do you get your loan approved?
There are a couple of things that will help when it comes to getting a home loan approved.
1. Account Conduct
Avoid “over the limit” or “unarranged overdraft” fees on your account. This proves to the lender that you are managing your finances currently and are likely to in the future. The same can be said about your Credit Card or personal loan repayments. Making sure your accounts are paid on time and not missed certainly goes in your favor.
2. Be realistic about how much you can afford
Work out how much your repayments are likely to be prior to applying. Every bank offers a repayment calculator, and there is even one on this website so you can see how much that house is going to cost per week. Remember to consider costs of house insurance and rates.
3. Know what your deposit is
If you are using the HomeStart Grant or KiwiSaver, find out how much you are eligible for before you apply. I have seen many bank “pre-approvals” that have been later declined as this wasn’t investigated before applying.
The following links will get you started;
KiwiSaver first-home withdrawal
Applying directly with the bank
You need to put your application in the best light to the bank. If you are comfortable doing your own research, approaching the bank may be the right option for you. This does limit you to that particular banks credit criteria, products and pricing.
Using a mortgage Broker
As a go-between for borrowers and lenders, mortgage brokers can be very useful if you aren’t confident in your understanding of finance or mortgaging. Hiring a broker can be an excellent way of finding the best value home loan given your personal circumstances. As they work with the lenders directly they have industry knowledge of who will potentially approve your loan, and who will give you the best deal – just make sure you select your broker carefully!
What is a mortgage broker?
A mortgage broker is a type of financial adviser who specialises in helping people find a home loan. After the selection of a home loan, the right mortgage broker can also manage the application process for you and provide tailored advice along the way, helping you secure the home loan.
What does it cost to use a mortgage broker?
Generally FREE – You don’t pay mortgage brokers directly for their services when arranging your home loan through a bank– they are paid a commission by the lenders they use. There are some rare occasions where a fee may be payable if you are needing finance through a specialist lender, however brokers are required to disclose this upfront.
What does a mortgage broker do?
A mortgage broker is essentially a conduit between you and the lender. Their first job is to assess your financial affairs, put together a picture of your credit-worthiness, and help you determine what type of home loan will be right for you.
Because they have access to numerous products, they will almost certainly have access to something that suits your needs. They can spend the time with you to understand what your goals are, to explain the options, and to help you with the paperwork. They can potentially provide you with a very useful service.
Pros of using a mortgage broker
- Brokers can help you put a loan application together, and put it forward in the best light
- A broker may be able to find you a mortgage that’s better for your individual situation and affairs.
- If you don’t have the time to do the extensive research required to properly assess the variety of home loan products available to you, a mortgage broker can do this for you (within the panel of products they sell).
- Mortgage brokers know the interest rates and application criteria for different lenders, and can negotiate on our behalf.
- They may be able to help you find a loan if a bank says no
- They may be able to get a better deal than if you went direct.
- All mortgage brokers are now required to be Registered Financial Advisers. They must have a complaints process in place and belong to a dispute resolution scheme. Check the official Financial Services Providers Register at the Companies Office website.
Cons of using a mortgage broker
- Educational qualifications and industry experience can differ widely between brokers, so make sure to enquire about this before you engage the services of any mortgage broker
Before engaging any broker it is a good idea to contact them and talk through your situation. This will give you the opportunity to ask them questions about thier experience in the industry, and how many lenders that they deal with – Not all brokers are accredited with all banks, and you want to be working with one that can offer you the most solutions.
Please contact me if you want to talk through your situation, or like my Facebook page to save my details for later.
References:
https://www.canstar.co.nz/home-loans/use-mortgage-broker/
https://sorted.org.nz/guides/shopping-for-a-mortgage
Disclaimer:
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Canterbury Home Loan Services Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.
A Disclosure Statement is available on request and free of charge.
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