What to prepare for a home loan application

Before meeting with your Approved Mortgage Broker, please prepare the following information:

Confirmation of your income
3 months bank statements on your cheque/everyday account
Confirmation of your deposit (if you don't already own a home)

Income

Confirmation of income includes:

• 2 x Pay-slips or ...
• Letter from employer stating salary or hourly rate of pay and average hours p/week or ...
• 2 years financials (if self-employed)
• 3 months bank statements

Your last three months statements on your cheque/everyday account. This is not to check up on what you spend, but to ensure there is no recent history of dishonoured cheques or payments.

Deposit

Unless you already own your own home, you will be required to prove your deposit. Savings account statements, term deposit certificates and investment statements are examples of evidence of deposit.

What else?

Once the loan application progresses further, you will need to provide the following:

Sale and purchase

Property valuation (in most cases)

There are different rules depending on the deposit you put towards the property:

When you borrow over 80%, you may be required to pay Lenders' Mortgage Insurance. This insurance protects the bank for the higher risk associated with low equity loans (under 20% deposit).

Overtime

Banks need evidence that you have been receiving the overtime for at least two years before they will take overtime into account.

Guarantors

This is an increasingly common option, particularly in Auckland where the starting price of property can be quite prohibitive. Generally though, because banks are quite wary of people who cannot save their own deposit guarantors will also have to be on the loan documents and must therefore also be able to afford the loan repayments. Some banks will also require those acting as guarantors to seek independent legal advice about the implications of being a guarantor before approving the loan.

Loan to Value Ratios (LVR's)

Most banks will now lend up to 100% for an owner occupied property. The more you borrow the more you will pay in Lenders Mortgage Insurance ­this fee varies widely so it pays to shop around. To calculate your loan to value ratio simply divide the amount you wish to borrow by the property value. For example you wish to purchase a $300,000 house and have a $40,000 deposit, your LVR would be 260,000/300,000 = 86.7% LVR.

Next: Learn about the various bank fees involved with a home loan...

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