Home Buyer: The home loan pre-approval process

30 October 2015 / Published in Your Money

Now that you’ve decided to buy a house and have your deposit together, it’s time to get pre-approved.

It’s a good idea to apply for your home loan before you start looking at houses so you know how much you’ll be able to borrow.

Finding a house before you get your finances sorted can add stress to the buying process, leaving less time to get your home loan organised before the purchase of the home needs to be completed.

If you’ve already started the house hunting process, but not spoken to your bank, now is the time to get in touch and apply for a pre-approval. It’s worthwhile doing this before you start spending money on LIM reports and building inspections or completing other due diligence for a property you may not be able to get finance for.

What is a pre-approval?

A home loan pre-approval is acknowledgement from the bank that you can borrow an agreed amount, provided the property you purchase meets its home lending criteria and general terms and conditions.

Pre-approvals often come with conditions you need to satisfy in order to finalise your home loan. Some examples of conditions include providing a registered valuation completed by an approved registered valuer using our panel valuation service and house insurance.

Having an ASB pre-approval upfront can help you get a lot of the hassle out of the way and provide you with reasonable certainty on what you can spend to help you narrow down your search.

There are a couple of things to note with ASB home loan pre-approvals:

  • Pre-approval letters of offer are valid for 60 days from the date of issue, unless specified for a shorter period or a specific property.
  • If you have less than 20% equity (i.e. the loan to value ratio is over 80%) in the proposed property you are buying to live in (owner-occupied), the pre-approval letter of offer is provided subject to the bank also meeting its loan to value ratio obligations to the Reserve Bank of New Zealand.

Read our first post in the Home Buyer series to learn more about home loans and what terms such as equity and security mean.

How can I prepare to apply for a home loan?

If this is your first property purchase, you might like to do some online research to help get prepared before you apply for finance. Check out our home loan application tips as well as our calculators to get an idea of how much you might be able to borrow. You can also use this tool to learn more about the benefits and features of the different ASB home loans.

How do I apply for finance?

ASB offers a range of different ways you can apply for a home loan – you can apply online in the middle of the night, drop into a branch during the day, handle it all over the phone, deal with a mortgage broker or ask a mobile lender to visit you at your home or work. Whatever your need there’s a convenient option that’s right for you.

Should I deal with the bank directly or go through a broker?

How you wish to approach the bank for a home loan is completely up to you. If you already have a good relationship with your bank, and perhaps even a specific person you like dealing with, then talking directly to your bank may be the preferable option for you.   

If you choose to deal directly with us we have a number of different ways you can apply for a home loan:

  • Online: applying online is perfect if you don’t have a lot of time during the day for a full application. The application form takes about 10 minutes and then a home lending specialist will ring you to complete the process during business hours. Apply online here.
  • Mobile lending managers: a mobile lender offers convenience by coming to you at a time and place that suits you best. They can also help you with a range of products – from home loans to insurance. Find a mobile lending manager.
  • Telephone lending specialists: if you’d like to arrange your home loan over the phone, you can call us on 0800 100 600 to speak with one of our lending specialists, 7 days a week between the hours of 8am and 8pm.
  • In branch: if you’d prefer to pop into a branch to speak to someone then you can do so. Find your nearest branch here. Call us on 0800 803 804 to make an appointment.

Alternatively you can choose to go through a mortgage broker. Mortgage brokers are registered or authorised financial advisers who offer advice to people who want to get a home loan. They generally don’t charge you for their service; instead they’re normally paid a commission by the bank. A broker’s job is to find the best home loan for you, take the hassle out of the process and liaise with the bank.

If you don’t have the time to investigate home loan options yourself, using a mortgage broker may be something to consider. If you think you’re going to use a mortgage broker, these are some questions you may want to ask them:

  • What experience and qualifications they have?
  • What (if any) fees they charge?
  • Which mortgage providers they deal with?
  • What commission they receive?
  • What other services they offer?

What information do I need to provide when applying for a home loan pre-approval?

  • Proof of income: the bank will need to make sure you have a regular income so that repayments on your loan will not put you under financial pressure. This may include providing three of your most recent payslips, or if you’re self-employed your most up to date financial statements prepared by an accountant.
  • Details of your expenses (outgoings): the bank needs to get an idea of what your expenses are to help understand your ability to make payments on a home loan. These include:
    • household costs
    • child support payments
    • financial commitments and debt payments (see below)
    • any other outgoings
  • Details of debt: the bank will need to see information about how much you owe, what your payments are and when you expect to finish paying off your debts. This applies to any:
    • loans
    • credit cards
    • hire purchases
    • store cards
    • overdrafts
  • Evidence of your deposit, such as:
    • a bank statement showing savings
    • KiwiSaver first home withdrawal balance estimate
    • proof of any gifted funds
  • Identification: if you’re not an ASB customer, you’ll need to provide two forms of ID, including at least one photo ID. This can be a driver’s licence, passport or something similar.  If you are an ASB customer, you’ll only need to provide one form of ID.
  • Proof of address: if you’re not an ASB customer, you’ll need to provide proof of address. This could be a utility bill (no more than three months old), a recent bank statement or government agency statement (such as a rates bill).
  • Bank history: if you’re not an ASB customer, then we’ll need to see your bank statements for the last six months. These need to clearly show your name (or your joint names), the logo of the bank and a running balance over the period of time.
  • Property information: if you’ve already found a house to buy, then bring along any information you have, such as the sales and purchase agreement, a valuation if you have one, or any other property reports.

What should I expect from a lending specialist at my bank?

When you apply for a home loan with ASB, the person you’re dealing with will be skilled in home lending. They’ll help you understand what’s involved in buying a home, what the application process is and give you an estimate of timings. They’ll also explain the different home loan products available, and any technical lending terms.

If you’ve been saving with KiwiSaver, they’ll also be able to explain how KiwiSaver may be able to help you purchase your first home, including what you’ll need to do to apply for a KiwiSaver first home withdrawal.

A lending specialist will also be able to give you guidance on how much you can afford to borrow and provide you with a maximum borrowing amount. You may not want to spend the maximum amount but it’s good to know how much you could borrow as things may change as you go through the house hunting process.

Your lending specialist will also be able to explain, in detail, the conditions of your pre-approval and what you’ll need to do to satisfy them.

If you’re not quite ready to buy a home but want to make sure you’re on the right track, ASB can still help. Get in touch to discuss your options and review your savings plan.

What do I do after I get my pre-approval?

Now is the exciting time, you can start looking at properties.  We’ll talk through the house hunting process in the next instalment of this series.

For more information about applying for a home loan click here.

ASB’s lending criteria, terms and fees apply.


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