The guide tells how to raise the chances of a lender saying yes to an application
Loan Market has launched a Buy Ready guide to provide prospective borrowers with tips and advice on how to increase the chances of a lender saying yes to an application.
The mortgage advisory business operates 150 franchises throughout New Zealand and wrote $6 billion in mortgages last year.
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“It helps prepare people when they approach a bank,” William Laban, Loan Market general manager north, told NZ Herald. “We find nine out of 10 people don’t have a budget and just rock up to a bank with a train wreck of bank statements on a hope and a prayer expecting to get a loan.”
“It no longer works like that,” Laban said – not with tighter lending criteria these days.
“Banks will be asking some pretty searching questions and often, you only get one shot,” he told the publication. “They will want to know about your personal finances, including savings record, credit history, employment, and a whole lot more. Having your ducks in a row has never been more critical because we've seen too many fail to secure a loan for these reasons. But, having said that, lenders don't expect people to live like frugal hermits; they just want to know you’re not splurging too much on the high life. If your living expenses are reasonable and the numbers stack up with what you want to borrow, then all good.”
Laban’s comments came amid a decline in home loans across the country since the introduction of stricter lending conditions through the Responsible Lending Code late last year.
After the code took effect, annual growth in lending fell from 11% in November to 8.1% in April. The rules under the Credit Contracts and Consumer Finance Act (CCCFA) have since then been relaxed, but banks are calling on the government to loosen them even further.
Read next: CCCFA changes are cosmetic says adviser
Laban said the Buy Ready guide, which Loan Market likened to pre-season training to get home buyers match fit, features five key tips covering account management as well as advice on how much people can afford to borrow, an explanation on how the deposit process works and what amount will be needed, budgeting, and why it is best to speak with experts before going to the bank.
Laban said tighter market conditions, the shifting landscape of inflation and interest rates, changes to lending regulations including new investor rules, tighter LVRs, and some lenders implementing their own DTIs, can sound like another language.
“Many customers don’t understand what some of these changes mean,” Laban told NZ Herald. “The bottom line is getting mortgage-ready is a complex, time-consuming process and the sooner you get started, the better. The days of turning up to a lender and getting approval, no questions asked, are gone.”
