Getting into your first home or taking that next step up the property ladder is an exciting time, but with banks getting tougher on lending, what can you do to prepare to put your best foot forward on your lending application?
Today we're talking with local mortgage broker, Shane Johnson from Right Fit Homes Loans, on what you can do to prepare your finances so you're going into your application in the strongest possible position
Banks typically look at your expenses from the last 3 months, so if you are thinking about getting into your new home, a little bit of forward planning & preparation is the key to getting those bank statements looking healthy. Here's our top 5 tips
When applying for a loan, banks want to ensure that you can afford the repayments and a good way to indicate that is through KiwiSaver and savings. Consistent track records of putting money aside each payday gives banks confidence you can afford a home
Make the commitment to be as disciplined as possible when it comes to discretionary spending such as buying new clothes, holidays, buying your lunch & dinners out for the next 12 weeks. Small amounts all add up & your bank account will be looking a whole lot healthier at the end of the 12 weeks. Going to the supermarket once a week or fortnight to do a big shop is better then going four times a week and spending more than you need to each time with impulse buys
Pay off & cancel your Afterpay / Layby
While Afterpay & Layby have become a convenient way to buy now, pay later, banks don't look favourably when you have these extra expenses coming out each week. Pay off the full amount & close the accounts down.
Credit Card Debt
Even if you have a small amount charged up on your credit card, the bank considers your entire credit limit as debt, they use a percentage of the limit as a monthly expense so better to have a small or none at all. Pay off as much as you can on your credit card & contact your bank to reduce the spending limit down as much as you can.
The bank wants to see consistent income being deposited into your account, that your expenses line up with what you put on your application, and that you dont have any un-arranged overdraught or bounced automatic payments. Make sure that your bank account demonstrates that you are in control of your money & know exactly where it's is going each week.
Need further advice?
Sometimes dealing with the bank directly can be daunting. By using a mortgage broker, you can be 100% honest about your finances & your broker can offer advise on the best way forward with your application.
Mortgage brokers are dealing with lenders every day & know what they are looking for, they know best deals on offer with interest rates, can offer advice on how to best structure your loan...and best of all their service is free.
If you would like to discuss further lending advice or if you are ready to take that next step, get in touch with Shane today firstname.lastname@example.org
Disclaimer: Frame Homes is not a qualified lending institution & we recommend you consult an independent Mortgage Broker or Bank to discuss lending options.