How to Apply for a Home loan?

Great! You want to know what are the steps to applying for a home loan. In this article, I’ll show you 7 easy steps to applying for a mortgage. Be ready to take some notes as there is quite a bit to get through or you can just bookmark this page. 

So if you’ve ever been through a credit card application at one of the banks, the process is quite similar, they’ll want certain documents and a bit more information. Because the amount you’re borrowing is not a $5,000 credit card but thousands of dollars if not close to a million dollars more!

I've also written an article on 6 huge reasons why you should buying a house. Anyway, let's begin! 

Step 1 - Discuss and meet with your Mortgage Adviser on steps to applying for a home loan 

The first step is critical you want to get right. You want to find someone that fits your personality, understands and listens to your needs. But ultimately can give you great financial advice and guidance. Good financial advisers and mortgage advisers should breakdown the entire process and add value by giving helping you understand why the banks do what they do.

So, that you have confidence when you get pre-approved. As Albert Einstein quotes- Learn the rules of the game. And then, you have to play better than anyone else. A great mentor of mine has also quoted a similar thing too. 

The reason why you want to discuss with a financial adviser or mortgage adviser/broker is that they’ll advise you and breakdown what the banks are disseminating out to the public. Banks will always advise that their product is the best out there but is it really in your best interest? Whereas a mortgage broker will have the knowledge across all the banks and narrow down which banks are best suited for your financial needs. 

By doing this, you’ll save a lot of time and  you can focus about looking for a house than trying to hunt down which bank is doing the best deal out there. Usually, the financial adviser will advise on which two main components that the banks look at. One is the deposit i.e. LVR and the second is the affordability i.e. can you service the mortgage. I’ve written an article on less than 20% deposit if you're interested. 

Step 2 - Application Process

Your mortgage adviser or broker will then send you an email or to an online application protal to begin entering your details and uploading the required documents that banks need to review the application. 

Once the application is filled and documents are provided. A typical list of documents are listed below, some will be applicable others not such as financial statements if you’re self-employed. 

The adviser will then go through the documents and application with you so that there is no missing information and ensure it’s true and correct. The mortgage broker will usually ask questions to get a further understanding of your financial situation and is the perfect time for you ask the questions too! 

Below is a typical list of documents you will need to provide to get a mortgage pre-approval

1. Payslips - 3 most recent payslips
2. 2 years of financial statements if you self employed and is completed by a chartered accountant
3. 3 months of bank statements (Across all accounts and other bank accounts)
4. 6 months mortgage statements (if you already have a mortgage in place with another bank or same bank)
5. Identification - must not be expired can either be Passport or Driver Licence 
6. If your not a citizen of NZ - then provide evidence that you are a permanent resident
7. If you’ve got credit cards then 3 months credit card statement
8. If you’ve got any short term loans such as Hire Purchases, Personal Loans and store cards, then 3 months statements will need to be provided with a summary of the loan
9. Confirmation Kiwisaver balances (If you are using this to purchase your first home)
10. Confirmation of First Home Buyers Grant (If you are using it - I’ve written an article here)
11. Gifting certificate (If you’ve got support to help with deposit)
12. Trust documents (If you plan to put the property into a Trust)
13. Rental Assessment (Only if you are buying an investment property)

There are other documents that may be required as each bank have different rules. But the above is a typical list you will need to provide to your financial adviser or mortgage broker. 

During the COVID-19 pandemic, banks are requiring more information around your pay. For example, a letter may be required from your employer stating how COVID-19 has impacted your employment and if it will be extended. Obviously, this is a case by case basis, for example, if you work as an essential service i.e. Doctor, then usually not required. 

Step 3 - Pre-approval/Approval 

This is where your financial adviser or mortgage broker will submit your application to the bank/s that suits your needs. They will continue to update you throughout the process and get you a conditional approval aka pre approval. Once an offer has been issued, they should go through with you what’s in the pre approval.

A pre-approval is part of the finance being completed, this pre approval will show you the maximum amount you can borrow from the bank and ultimately give you confidence in what is the maximum purchase price you can buy on a property. 

If you go to an auction you’ll want an unconditional approval where all conditions have been met. This is a whole other topic, which I'll write in the future. 

Some standard conditions are ensuring the house is insurable, the security (home) is acceptable to the bank’s requirements. 

One important note is that without the bank approving the property, it isn’t truly an ‘unconditional offer’ so be sure that your mortgage broker has achieved this for you. 

Step 4 - House Hunting

Now that you’ve got a pre-approval in place. You can head to open homes and see what’s out in the market. I’d recommend you go look around different areas or suburbs to gauge what type of properties you can purchase and what is the upper limit of the home you can buy.

Tip - You can engage real estate agents to help you and act as a buyers agent. 

Step 5 - Loan structure 

You’ve found a house and gone unconditional or you’ve won at auction! 

Congratulations on being a step closer to owning your home. Now that settlement date is set (the day you receive the keys to the house), you’ll need to finalise the loan structure of your home loan/mortgage. 

Your mortgage adviser will discuss all the different loan products that the bank has to offer and decide on how you want to structure it. It could be a mix of revolving credit & fixed facilities or it can be all fixed.

There is no right or wrong, as each home is different and the financial needs on each loan are different from person to person. But your financial adviser will help. 

Step 6 - Settlement!

Once you’ve finalised how you want to structure your mortgage in step 4. Loan documents will be issued to your solicitor/lawyer from the bank. Your solicitor will be in contact with you and they will also finalise settlements with the bank. You are now one more step closer to applying for a home loan. 

Step 7 - Congratulations! Keys To Your New Home! 

YAYA! You’ll get notification from the bank telling you that loans have been drawdown on settlement date. You should see some new accounts loaded on your internet banking with the home loan added. The real estate agent will also get in contact with you to give you access to your home! 

Conclusion 

There you have it, my 7 steps to applying for a home loan in New Zealand. There is a lot more to it behind the scenes within each step. But your mortgage broker or adviser will guide you through the process. 

If there is something you want more information on or to clarify put in a comment below. 

Alternatively, you can email me or book in an appointment with me below.