Over the next couple of weeks I’ll cover off some of the basics which a house purchaser should know. Today I’ll have a look at what’s needed for arranging finance
Finance:
* Deposit : Having a deposit is crucial to being able to purchase a new home. The bigger the better. Your deposit can come from a variety of sources including the following: Kiwisaver and first home grant, savings, money obtained from selling an asset (car or shares), inheritance and gifting from parents or family. Having a deposit of at least 20% from any or all of these sources will make life a lot easier for you with a lender. The criteria you face from a lender will be more relaxed and you will potentially avoid some low deposit fees and charges with a 20% deposit
* Income and Servicing: Your income and deposit will determine how much money you can borrow. If you are waged or salaried this income is typically used completely. However for a self employed person or someone with a bonus or commission component to their income an average of your last 2 years income is more likely to be used so a poor financial performance in the previous year may impact what you can borrow.
* Short-term debt: Any other debt you have is also taken into account with your borrowing. It will be looked at in 2 possible ways. Your debt repayments will be factored into your serving calculation which will reduce how much you can borrow. Secondly if you have a large amount of debt such as car or personal loans and credit cards this may threaten getting any lending at all, especially if you have a small deposit as this is viewed as undesirable by lenders.
* Account & Financial Behaviour. Most lenders will request 3-6 months of your bank statements. This is used in the assessment. They will verify your income through this, also look for other financial commitments – such as short term debt. Your statements will also be examined for missing payments or going into unarranged overdraft, either of these could jeopardize your finance. It is usually best to have a clear 3 months of statements before applying for lending.
Mike Columbus is an founder of sortmymortgage.co.nz and can be contacted on 03 335 3527 or 021 369908. This article is an extract from; “Sort My Mortgage”(What Your Bank Doesn’t Want You To Know) To get your FREE copy email info@sortmymortgage.co.nz. This advice is of a general nature only and before acting on it please read my disclaimer which can be obtained by emailing me.