The Do’s and Don’t of Applying for a Home Loan
So you have decided to apply for a home loan.
Whether this is your first or second property, lenders and mainstream banks change their criteria and the way they deal with their customers.
What you could do last year may not be the best option for you this year.
I have created a do’s and don’ts of applying for a home loan for you so that you can go through the process with ease and hopefully come out the other end with the right home loan to suit you.
Dos For Avoiding Common Mortgage Mistakes
1. Do have your finances in order.
Make sure your documentation is thorough, accurate and complete to give your loan team everything they need to get you the right approval. Paperwork varies based on your lender, but typically includes:
- Loan application
- ID (passport or driver’s licence)
- Proof of income (payslips or recent financial accounts if you are self-employed)
- Proof of deposit (savings, Kiwisaver, gift, equity)
- Bank statements (all accounts including credit cards)
- Loan statements on any other lending
2. Do respond as quickly as possible.
Try to be as responsive as possible when working with your adviser. If you can respond promptly, your team will be better able to keep moving forward and get your loan approved in a timely fashion. The longer you wait to respond, the more time your team spends waiting to work!
3. Maintain your current employment throughout the loan process.
If you’re looking to make a career change, wait to move on to your next gig until after your loan has settled. Your employment, and the income it brings, play a large role in the mortgage process. Changes in your employment, especially during loan approval and settlement can impact and needs to be disclosed to the lender. Of course, keeping your current employment throughout the loan process is not always in your control. Notify your adviser of any changes to your employment promptly.
4. Do ask questions.
This is perhaps the most important do of all! Throughout the process, your mortgage adviser will do his or her best to make everything clear. Their goal is to ensure you feel 100 percent comfortable with your loan and fully informed about the process.
However, if anything is not clear do not hesitate to ask your team questions. They are there to help.
Now that we’ve covered the dos for getting a mortgage, let’s look at some common mistakes and how you can avoid them.
Don’ts for Avoiding Common Mortgage Mistakes
1. Don’t wait until you find the perfect house to apply.
Apply for pre-qualification when you know you’re ready to start looking, instead of when you’re “finished” looking. You’ll be better positioned with the seller and avoid potential heartbreak when you are preapproved for the type/price of home you are looking for. If you don’t go through the preapproval process, you’ll be behind and may miss out on that house you fell in love with.
2. Don’t submit incomplete documents or photos of documents.
Time can be of the essence. Don’t let incomplete documents slow your loan process down. Take time to ensure everything is in order before sending your documents to your adviser. Likewise, make sure you’re them the forms or documents they need to complete the process. For example, photos of documents are typically unusable.
3. Don’t make large cash deposits or give any large gifts without first talking to your adviser.
Your loan team needs a paper trail of all transactions to show why your bank accounts are fluctuating. Their goal is to ensure your income is coming from legitimate sources and that you’ll be able to pay off your mortgage debts. So, a large change in your finances, either plus or minus, could throw a red flag.
4. Don’t apply for other forms of credit before, during, or shortly after your loan process.
Multiple credit inquiries in the same time period could harm your credit score but most importantly can affect the outcome of your home loan approval.
5. Don’t assume your bank is the best choice.
Many people think that the bank they use for their everyday banking is the best option to go to and don’t think of exploring their options. Use a mortgage adviser to scope out the wider market. By understanding your situation, and what you intend to do, they will look to place you with the best option for those circumstances.
They will do all the leg work for you while you start your house hunting and save you time, money and stress.
Shopping for your next home can be both exhilarating and frustrating. This is even more relevant in the challenging market of the present time.
Remember, knowledge is power.
Follow these tips on the top The Do’s and Don’t of Applying for a Home Loan and avoiding common mortgage mistakes and educate yourself on every part of the home-buying process for a smoother journey.
