So much to think about, so much to consider. We’ve broken it down for you into a handy up-to-the-minute checklist that you can download, print and pin up on your wall at home. Once you’ve got all the nuts checked off, you’re good to go!
But first, read on for a bit more information on some of the checklist items that might need further explanation:
With current post-covid lending criteria, you’ll need at least 5% deposit in your savings account and/or KiwiSaver account. Not only this, but irrespective of how much deposit you have, a minimum of 5% must be genuinely saved over 3 months or more (that includes KiwiSaver).
Here’s a tip for you: put your KiwiSaver into ‘Conservative’ mode so any subsequent market movements don’t destroy your deposit.
This is because you’ll end up paying a higher mortgage interest rate while your loan is above 80% of the value of your property.
For deposits under 20%, a registered valuation of the property will be required.
This is a good way to boost your deposit if you’re lucky enough to have a parent or someone else who is willing to guarantee the portion of the deposit you need to make up the 20%. This means that they must be in a strong financial position and have enough equity (or cash) to absorb that additional amount you need to make up your deposit.
It’s worth noting again that a guarantor is only guaranteeing the portion of the deposit they have agreed to and not the entire loan. We emphasize this because it’s a common misconception.
Your NZ resident’s visa must not have any travel conditions if you’ve been in a job for less than 12 months and you’re not university qualified.
You’ll need to purchase a property under the regional price thresholds, and earn under $130,000 as a couple or $85,000 as an individual to be eligible for the First Home Grant.
This is a big one. Consumer finance debt must be less than half of your deposit. Squirrel offer a debt consolidation loan to simplify your payments and improve your credit record.
If you have any student loans these will significantly impact on your ability to borrow. Get it paid off and your borrowing power increases dramatically.
Positive credit means that when a lender checks your credit file they can not only see all of your loans but they can also see if you have missed any repayments along with other commitments like utility bills. You can check your own credit history via www.creditsimple.co.nz before you apply.
No missed payments! Sloppy account conduct can kill your chances. Don’t have too many bank accounts if you don’t manage them well. Make sure you manage your money well at least for the 3 months before you apply for a home loan. If you have any direct debits make sure they are timed to go out after your salary is paid.
You’ll need to be able to afford the payments. A good way to figure it out is that anything over five times your income will be a stretch, particularly if you have any additional costs to pay such as servicing existing debts or childcare.
Add up what you are paying in rent, what you’re managing to save and any discretionary costs that you can cut out. Here’s the stress-tested monthly payment amounts on a few different mortgage scenarios:
$400,000 = $2,660 per month
$500,000 = $3,230 per month
$600,000 = $3,990 per month
You’ll need to have been in your current role for over 90 days, and be out of any probation periods before applying for a mortgage.
We’re not talking about a burglar alarm here. There should be no compliance issues with the property you’re looking to buy. If you have less than 20% deposit, then don’t buy monolithic plaster houses (lots of houses built during the 80’s) or houses with other compliance issues.
Phew! That’s quite a bit to tick off but if you can get through the list then you’re well on your way to being ready to have your photo taken next to a ‘sold’ sign.
The Chief Squirrel John Bolton (aka JB) is jumping online to talk about the state of the market, interest rates and more importantly, answering your questions about buying a house post Coronavirus. It's free to join and spaces are limited so don't miss out.