In a recent survey of 1,000 Kiwis, 73 per cent of respondents say it’s simply too hard right now to apply and be approved for a home loan. What’s more, an even greater number believe it’s not worth the effort, as their mortgage application is likely to be declined. Surprising results when you consider that many of these would-be borrowers could probably have qualified for lending just seven months ago.

But tougher lending rules and tighter loan-to-value ratios (LVRs) - coming off the back of several years’ worth of house prices increases - have meant first home buyers have more hoops to jump through to qualify for lending, and now require much bigger mortgages just to get into the property market.

Furthermore, with inflationary and interest rate rises reducing affordability, lenders are cutting back on the size of the home loans they are approving. So, what should first-home buyers do in this environment to help speed up the process of getting a home loan? And is it even worth applying for a mortgage now?

Opportunities for first home buyers

When the CCCFA first introduced new lending rules in December 2021, lenders were forced to decline loans they would previously have made. Media headlines splashed stories of spending on pets and K Mart purchases that put an end to first home buyers’ dreams! Not surprisingly, a large number of first home buyers simply gave up the hope of ever owning a home.

However, the recent announcement by Government of changes to the CCCFA lending laws could change the lending landscape, potentially opening up more opportunities for first home buyers. Now, rather than asking “can I get a mortgage?”, a better question would be “how much could I borrow?”.

The best way to determine that is to work with a mortgage adviser who can run your numbers and give you a fairly accurate estimate of how much you may qualify for. Then it’s up to you to decide whether or not you can buy a home for that amount, or if you need to do a little more homework on increasing your income, saving a larger deposit, or cutting back on expenses.

Help get your application over the line

Our best tip for hopeful first home buyers is to start living as if you already have a mortgage. That means keeping expenses down, cutting out discretionary spending, and setting aside the extra amount you’d be paying for your home loan, i.e. the difference between your rent and your mortgage.

Do this consistently for at least three months before you apply for a home loan. This is to prove to lenders that you can afford a mortgage.

And when you’re ready to apply, ensure you have all of the following ready to present to the lender, as this will help speed up the process and maximise your chances of home loan approval.

• Check that you have 90 days’ worth of bank statements for the account or accounts used to pay expenses from including credit cards.
• Evidence of your income either in your bank statements or payslips, employment contracts or financial statements that show your income.
• Electronic copies are preferable, and be prepared for more in-depth questions about your finances. 

Get help preparing your home loan application – or get the advice you need to get you to that point. Work with a Mortgage Express branded mortgage adviser by getting in touch today.