Are you going to buy a property in 2023? Here are seven resolutions that can help keep your financial resume in shape. And the fitter it is, the more chance you have to be able to buy.
Resolution #1 - Clearly outline your goal Having a very specific goal is the first step to reaching it, so write down exactly what you want to achieve. For example, "buy a 2 bedroom unit in Hawke’s Bay by 31 December 2023" or "buy an investment property in Flaxmere by end of August 2023". Having a time-frame attached to your goal will add a sense of urgency and help keep you motivated and on track.
Resolution #2 - Set up a budget for 2023 Good saving habits are very important if you are planning on getting a home loan this year. Set a monthly savings target. Start by working out where your money is going. You will need to know precisely how much you spend on essential costs like rent, food, bills and transport, and then allocate money for the debts you are paying off. Cut up the credit cards. Once you have a clear view of your expenses, you can determine what you can cut back and what proportion of your income you will be able to allocate to savings. The more money you have saved in the bank, the more appealing you are to a lender.
Resolution #3 - Keep a steady job Having a steady employment history and income are two of the biggest factors lenders look at when evaluating a home loan application. Ideally, you will have had a steady employment history for at least two years. This will help lenders predict your future income. Be aware that in many cases, lenders will contact your employer to ensure you are still employed and to verify your salary. If you do change jobs, be sure to let your lender know as they may require extra documentation. If you are moving from a job that pays hourly to one that is salaried with equal or more compensation, it may actually help your application, as lenders prefer borrowers to have a steady, predictable pay check.
Resolution #4 - Eliminate credit card debt Lenders use your debt-to-income ratio, or in other words, they compare the amount you earn against the amount you spend. This ratio is important to ensure you don’t over extend yourself with the home loan repayments. Avoid making any large purchases such as a new car or expensive holiday while you are saving for a property. Even if you have pre-approval, home loan lenders re-check your credit before they finalise the loan. This means that any new debt could delay or prohibit your home loan from going through.
Resolution #5 - Build a solid credit history Your credit history is the most important document that lenders will look at to determine how risky a borrower you are, how much they are willing to lend you, what interest rate they will offer or if they will lend to you at all. Generally, the lowest interest rates are normally only available for borrowers with a high credit score. To understand your score, purchase a credit report which will give you a basic history of your financial activity. Knowing where you sit before you meet with a lender gives you the opportunity to improve your score should you need to.
Resolution #6 - Get pre-approval Having an idea of how much a lender will lend you is important. If you don’t have pre-approval and know exactly how much you can spend, you might miss out on the perfect property because your finances aren't in place. You won't be able to confidently make an offer on a property without the panic of a last minute rush. Pre-approval essentially is an approved loan amount for a particular time period. Knowing this enables you to set your price range ceiling for yourself and confidently make offers on a property you want to buy.
Resolution #7 - Research the market It is important that you spend time researching the area you are looking at buying in, so you understand the type of properties available, the price points and how quickly the properties are selling. By understanding the market, you will be able to identify the right property for you quickly, if it is good value and how quickly you need to move on the purchase.
Need help getting started? Search instagram for @francescooknz for some great tips on how to stay focused on your goals and have some fun along the way.