Feb 19, 2018 12:05:25 PM

Home loan pre-approvals: What you need to know

Topics: new zealand property, new zealand real estate, mortgage adviser, NZ Property Market, Home Loan, nz mortgage, family home, Pre-approvals, Mortgage 1

Having a pre-approval in place before you start house hunting has a number of benefits: As well as showing sellers and agents you’re serious about buying, it helps speed up the process when you find a home you like, which puts you in a far better negotiating position. If you are considering applying for pre-approval, take a look at our tips for a successful pre-approval application.

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Why get pre-approval?

Securing a pre-approval from a lender effectively sets a limit on how much you have to spend. That means you can bid or negotiate with confidence when you find a property you want to buy.

When applying for pre-approval, you’ll go through the process of providing relevant information to your lender – like proof of your income, expenses and savings – which means all the hard work is done up front for you, speeding up the process when it comes time to buy.

As with home loan applications, when applying for a pre-approval it pays to shop around. Your mortgage adviser can do the hard slog for you by shopping around on your behalf and advising you on the right deal to fit your situation, so you only need to complete one application.

 

Getting a pre-approval

When it comes to securing a YES from your lender, there are a few things you can do to ensure your pre-approval application is approved.

  • Save a deposit – the bigger the deposit, the better your chances. A history of good savings will also show you’re able to manage your income well.
  • Clean up your credit – pay back any outstanding defaults.
  • Do away with debt – get rid of short term debt and pay any credit card debt in full each month.
  • Take care of your everyday accounts – your lender will want to see 3 months of bank statements so ensure you manage your account well, avoiding any dishonours or unauthorised overdrafts.
  • Keep a little aside – it’s important you show your lender you’re able to live within your means, so try to leave a surplus of income in your account each month once all expenses have been paid.
  • Maintain a stable employment record and avoid job hopping. If you are self-employed, keep good financial records as the lender will want to see two years’ worth of these.

While there are certainly benefits to having pre-approval up-front, it’s important to note that pre-approval applications are recorded on your credit file. Applying for pre-approval with several lenders in a short space of time and being declined can have a negative impact on your credit score. Most lenders prefer that you have one or two enquiries in a six-month period.

Another good reason to work with your adviser who can guide you on the lenders most likely to approve your application!

 

Specialised advice

If you’re serious about buying, do your legwork up front and secure a pre-approval. For assistance in finding the right lender and the best financial solution for your unique situation, talk to a Mortgage Express adviser today.

 

References:

http://www.thefirsthomebuyersclub.co.nz/home-loan-pre-approval/

https://www.aussie.com.au/home-loans/first-home-buyer-guide/choosing-the-right-loan.html

https://www.statecustodians.com.au/6-things-you-may-not-know-about-home-loan-pre-approvals


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 Mortgage Express 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.