7 common first home hunting mistakes

There are a few reasons why not knowing your home buying budget is a serious mistake to make.

Firstly, you want to narrow your search. If you log onto Trade Me Property right now and simply review all of the properties for sale in your area at the moment, you’ll probably be overwhelmed by the sheer amount of choice available.

While you might think that having options is a good thing, it can also get in the way of making progress. Your aim is to buy a property, not to ogle all of the beautiful homes for sale in your area (although this can be fun too!), so knowing your price bracket will help you start to zero in on real possibilities. You can use our price filters to start this process.

Second, if you don’t have a realistic idea of what you can afford, you’re going to waste a lot of time being rejected by banks for home loan pre-approval. We’ll talk more about this process later, but, the key takeaway at this stage is that, if you approach the bank asking for a wildly optimistic amount of money for a home you clearly can’t afford, they’ll turn you down.

Finally, if you don’t have a realistic budget in mind, you’re not taking the most efficient route to saving for your home deposit. If buying your first home is a key priority in life right now, you want to be reaching this target ASAP, so you’ll need a clear idea of how you’re going to get there. No budget = no plan.

Not sure how to work out what your budget should be? Our partner, homes.co.nz, has this awesome insights tool that will allow you to see what properties in a neighbourhood have sold for, and track homes’ values in a specific suburb.

The next few points relate to getting pre-approval for your first home loan, as this is a crucial stage in your property buying journey, and one where there’s plenty of room for error.

When banks assess your mortgage application, your credit score is one of the key factors they’ll examine before deciding whether to lend you the money. Therefore, you really need to know what shape it’s in before it’s assessed.

If it’s not where it needs to be, chances are your application will be rejected, and you’ll be back to square one.

The good news is you can check your credit score easily using online services such as illion, Equifax and Centrix. And, if your score isn’t in a good place, you can take steps to improve it. Ways to do this include:

• Reducing (or ideally eliminating) current debt that you owe.
• Paying your bills on time.
• Not missing payments, for example, on credit cards.
• Not taking out new lines of credit frequently.

Not having the following documents will prevent you from applying for a home loan, so make sure they’re ready to go:

• Your ID: a passport or driving licence.
• Proof of address: typically a bank statement or utility bill in your name.
• Bank statements: most lenders will want to see the three most recent months’ statements from your current account.
• Income evidence: payslips or a copy of your employment contract. If you’re self-employed, you should give your end-of-year financial statements.
• Evidence of your deposit: this could be confirmation of your withdrawal from your KiwiSaver or a bank statement.

Additionally, for first home purchasers, you’ll also need to show:

• A letter from your employer confirming your employment.
• Your three most recent, consecutive payslips.
• Evidence of your NZ citizenship or residency.
• Six months of bank statements and three months of credit card statements
• If you’re self-employed, financial accounts for year end prepared by your accountant.

You’ll soon come to realise that there are a lot of options out there when it comes to finding a mortgage in NZ.

One of the best things you can do to help you find the right mortgage is to use a mortgage adviser. These pros do a lot of the legwork for you by contacting lenders and sorting through the range of mortgage products available, and then presenting you with the options.

Another great reason to get in touch with a mortgage advisor is that it’s absolutely free! They will also help you to structure your mortgage to reduce your interest rates, which will help you pay off the mortgage faster.

Yes, a big part of getting your home deposit together simply requires hard graft by saving money. However, it would be self-defeating not to take advantage of the variety of schemes available to help you towards this goal. A few of the most important include:

• Using your KiwiSaver: as long as you meet the eligibility requirements, you can put the funds in your KiwiSaver towards buying your first home. This is usually the only time you can access this money prior to retirement, and can be a great help in reaching that goal.
• The First Home Grant: The First Home Grant is quite literally free money that the Government gives you to help you buy your first home. Because this is a grant, rather than a loan, you don’t need to pay this money back. Again, there are eligibility criteria that you need to meet in order to access this scheme.
• Applying to lower your deposit: while you might think you need a deposit of 20% of a property’s value, it’s actually possible to have this amount reduced. There are a number of ways to do this. For example, you might be able to pay as little as 5% if you are open to buying a turn-key new-build property.

Buying a home in NZ involves a lot of important paperwork – think everything from LIM reports to sale and purchase agreements – and there’s a lot that can go wrong if you don’t have a seasoned professional by your side to check these over.

A good property lawyer will help you jump through these hoops, and so much more, taking a lot of the stress out of the process, and ensuring that you don’t make any silly mistakes. We know that the additional costs might be the last thing you want to consider right now, but trust us, it’s worth it.

Again, in the name of reducing costs, it might be tempting to trust your own (or your Dad’s) visual assessment of a property from the open home.

While attending open homes is definitely an important step, there’s no substitute for getting a professional builder’s report done. These crucial documents will let you know about any potential structural issues the house might be facing now, and also potentially allow you to predict potential problems in the future.

This has important impacts for the valuation of the property, as well as knock-on effects for the final amount a bank will be willing to lend you. Even if the seller has already had such a report done, it’s crucial that you get your own, and that it’s undertaken by an independent, seasoned builder who really knows what they’re talking about.