{"id":1844,"date":"2024-10-01T00:49:41","date_gmt":"2024-10-01T00:49:41","guid":{"rendered":"https:\/\/mortgageatoz.co.nz\/staging\/?p=1844"},"modified":"2024-10-11T12:28:39","modified_gmt":"2024-10-11T12:28:39","slug":"how-do-banks-assess-your-mortgage-application","status":"publish","type":"post","link":"https:\/\/mortgageatoz.co.nz\/staging\/how-do-banks-assess-your-mortgage-application\/","title":{"rendered":"How Do Banks Assess Your Mortgage Application?"},"content":{"rendered":"\n
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Knowing how a bank assesses your mortgage application and what they\u2019re looking for gives you more power to get your application in order. <\/p>\n\n\n\n

Banks assess your application using the 4 Cs: Capital, Capacity, Character and Collateral. <\/strong><\/em><\/p>\n\n\n\n

Get these right and you\u2019ve boosted your chances of approval.<\/p>\n\n\n\n

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<\/span>Capital<\/em><\/span><\/h2>\n\n\n\n

Have you got enough skin in the game? <\/p>\n\n\n\n

Banks mainly focus on your deposit and your debts. They also consider your assets. <\/p>\n\n\n\n

The bigger your deposit, the better chance of getting approved. <\/p>\n\n\n\n

You can get approved with as little 5% deposit, but the criteria is strict. <\/p>\n\n\n\n

A higher deposit may also mean you get more options on who will lend to you, and maybe even a lower interest rate. <\/p>\n\n\n\n

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Deposit quick tip: Open a bank account today and label it \u201cHouse\u201d, then set up an automatic payment into it.<\/em><\/p>\n\n\n\n

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<\/span>Capacity<\/em><\/span><\/h2>\n\n\n\n

Can you make mortgage payments? <\/p>\n\n\n\n

The calculation is simple: your income minus your expenses. <\/p>\n\n\n\n

The more you earn and the less you spend the better. <\/p>\n\n\n\n

Banks also add future expenses to the calculation, like house insurance and rates. <\/p>\n\n\n\n

Finally, banks want to know if you can still afford a mortgage even if interest rates increase, so they test your affordability based on an interest rate of 2-3% above the current interest rates. <\/p>\n\n\n\n

You don\u2019t need perfect bank statements to get approved \u2013 we can explain to the bank how you can reduce some of your expenses. <\/p>\n\n\n\n

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Capacity quick tip: Your future mortgage repayments plus rates and insurance will likely be more expensive than your current rent. Each week put the difference between your current rent and future payments in a savings account to prove you can afford the increased payments.<\/em><\/p>\n\n\n\n

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<\/span>Character<\/em><\/span><\/h2>\n\n\n\n

What\u2019s your financial behaviour? <\/p>\n\n\n\n

Banks look at your overall position, your bank statements and your credit check. <\/p>\n\n\n\n

Do you save for the things you want, or regularly apply for credit? <\/p>\n\n\n\n

Do you pay all your bills on time? <\/p>\n\n\n\n

Do you run all your accounts with positive balances and always have a buffer? <\/p>\n\n\n\n

Are there any serious issues with your financial history? <\/p>\n\n\n\n

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Character quick tip: Stop applying for more credit, pay all your bills on time and save a little buffer in your accounts.<\/em><\/p>\n\n\n\n

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<\/span>Collateral<\/em><\/span><\/h2>\n\n\n\n

This is the house you\u2019re buying, which is the bank\u2019s security over your mortgage. <\/p>\n\n\n\n

If you don\u2019t pay your mortgage, the bank will sell this house to get their money back. <\/p>\n\n\n\n

The larger the deposit you have, the more obscure, run-down or harder-to-sell house the bank will consider. <\/p>\n\n\n\n

With a small deposit, the bank will probably only consider tidy well-maintained houses.<\/p>\n\n\n\n

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