New Zealand has come down in interest rates when buying property and banks are giving at a rate of 3.55% for a fixed year term. This decreasing trend in interest rate is having more and more kiwis wanting to either buy a first home or even invest in more properties. Before we step towards buying a house, we need our home loan pre-approved. Pre-approval will give us a strong starting point when you start your house hunt and when you know how much a bank is able to lend, you will be able to look for the right property.
The pre-approval you will get will be conditional, but it gives you head start for finding your ideal home quickly. The process involves quite a bit so it might pay to get a mortgage broker to do it for you or simply have the bank do it for you. Different people prefer different and most of us want the most we can borrow from the bank so that you can buy your dream home. So, what exactly is the process for a home loan pre-approval.
So, what is pre-approval? In basic terms it confirms a certain amount of money you can borrow from the lender. The conditions set out are a rated valuation of the home you will be buying and followed with the copy of signed sale and purchase agreement after the offer process has been accepted. Pre-approval will be valid for a period of 90 days and which normally is a good period of time for buying a home.
Getting the pre-approval
If you have a mortgage broker, then he/she will basically fill in all the required forms and provide everything to the bank to get a favorable outcome for your home loan. This can also be done by contacting the bank by yourself. The required document you will need are listed below.
– Income is shown by presenting payslips of 3 months and prove you have regular income coming in. If you are self-employed then you will need to provide financial statements, and this should be done by your accountant.
– Debt will also be shown to the bank and this includes credit card, store cards, any overdraft etc. This will show how much and when are you expected to pay it by.
– Expenses also need to be shown to the bank so that they know exactly how much is being payed out and that you could repay the payments for the loan you will be borrowing. Your expenses will include the following, financial commitments, household costs, debt repayments, child support and any other outgoing expenses.
– Deposit that you will be making from your bank statement, KiwiSaver withdrawal, or any proof of gifted amount.
These are the main things you will provide alongside your ID, Proof of address, Bank statements for the past 6 months and bank account detail. The bank requires you to provide as much as possible for them to make a favorable decision to your home loan. This is where your mortgage broker comes in handy and they will make sure they present the bank with the required documents and get the home loan pre-approved. This is easier than doing it yourself and it assures you that you will get a better outcome from it.
So, you might think that you do not meet all the requirement for the pre-approval and not take the next step towards buying your dream home. Before you quit just talk to a mortgage broker and let him/her figure out if it is possible for you to get the pre-approval or not and then decide. Happy moving everyone…