Pre-approval is your license to start the home buying process. We spoke to Ruan from Mortgage Lab about the three things banks want to see when you apply.
Ruan from Mortgage Lab
Ruan from Mortgage Lab is passionate about connecting home buyers and property investors with lending solutions that work for their situation. Pre-approval is your license to start the home buying process. Although everyone’s individual financial situation is different, there are three things banks generally look for when you apply. Ruan from Mortgage Lab spoke about making a B.I.D at our latest Avenue Apartments event. Here’s what he covered:
B - Behaviour
Banks want to see good behaviour. This doesn’t mean that if you’ve had a history of bad finances or are currently on the road to improving your financial situation that you won’t get Preapproval from a lender. It just means that you should start a conversation with your Mortgage Broker to help guide your financial behaviour and increase the appetite of banks to engage with you. This means showing you can save at least 5% of the purchase price of your desired property (this amount can include your Kiwisaver savings), acquiring as strong a deposit as possible and being aware of where you sit with your credit worthiness.
I - Income
The general borrowing rule is that you can borrow 5 times what your annual income is. Banks are typically looking for consistency. Salary or Wages are the easiest to assess, but there are several other forms of acceptable income. The key for a lot of people is to being able to incorporate commissions, bonuses, overtime and other more irregular types of income into this equation. Self-employed applicants should endeavour to produce past 2 years financials and/or past years IR4s (IRD Tax Summaries). With some lenders for newly Self-employed applicants 6 months GST returns and business bank statements are acceptable. This is something Ruan (Mortgage Adviser) from Mortgage Lab can help you assess, along with stress testing this income, relative to your borrowing capacity.
D - Debt
It is possible to gain pre-approval while you still have existing consumer debt i.e. Credit Cards, Overdrafts, Interest Free Hire Purchases, Personal Loans. What can happen is banks provide pre-approval, but on the condition that debts are brought down to a certain level or eliminated completely. Ruan from Mortgage Lab will work with you to help find the right mix of consumer debt that will be acceptable to lenders.
All the aspects of the pre-approval process require a personalised solution, so book a meeting with our team, and let’s get Ruan from Mortgage Lab in your corner to help you understand what you’re capable of. Even if you aren’t quite ready to go ahead, this meeting can help us formulate a plan that’ll get you ready for the pre-approval process.
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