How to Qualify for a First Home Loan
Purchasing your first home is a significant milestone, but it can also be a daunting process, especially when it comes to securing a mortgage. Fortunately, there are initiatives designed to assist first-time buyers in overcoming financial hurdles. One such initiative is the First Home Loan, which aims to make home ownership more accessible by lowering the deposit requirement. This article provides a detailed guide on how to qualify for a First Home Loan, tailored for the local market.
Understanding the First Home Loan
The First Home Loan, previously known as the Welcome Home Loan, is a government-backed initiative underwritten by Kāinga Ora – Homes and Communities. It allows eligible first-time buyers to purchase a home with a deposit as low as 5%, compared to the typical 20% required by most lenders. This makes it an attractive option for those struggling to save a large deposit.
Eligibility Criteria
To qualify for a First Home Loan, you must meet several eligibility criteria:
- Residency Status:
- You must be a citizen, permanent resident, or hold a resident visa and be ordinarily resident in the country.
- First Home Buyer Status:
- You should be a first-time home buyer or, in some cases, a previous homeowner in a similar financial position to a first-time buyer.
- Income Limits:
- Your annual household income before tax should not exceed $95,000 for an individual or $150,000 for two or more buyers, regardless of the number of dependants.
- Deposit Requirement:
- You need a minimum deposit of 5% of the purchase price of the home, which can include savings, grants, KiwiSaver withdrawals, or gifts.
- Property Requirements:
- The property must be intended as your primary residence, and you must not own any other property or land (excluding Māori land).
The Application Process
- Choose a Participating Lender:
- First Home Loans are available through selected banks and lenders. It’s important to choose a lender that suits your needs and check their specific lending criteria.
- Gather Required Documentation:
- Prepare necessary documents such as proof of identity, proof of address, evidence of your deposit, household income details, and a breakdown of expenses.
- Pre-approval:
- Applying for pre-approval can help you understand your borrowing capacity and give you a price range when searching for a home. Pre-approval involves an assessment of your financial situation and eligibility.
- Full Approval:
- Once you find a property, you can apply for full approval. This will involve a thorough review of your financial ability to repay the loan, your credit history, and the property’s value.
Additional Support
In addition to the First Home Loan, there are other support options available:
- KiwiSaver First-Home Withdrawal: If you have been a KiwiSaver member for at least three years, you can withdraw your savings to put towards your first home purchase.
- First Home Grant: Eligible buyers can apply for a grant to assist with the deposit, which can be combined with the First Home Loan.
Qualifying for a First Home Loan can significantly ease the financial burden of purchasing your first home. By understanding the eligibility criteria, preparing the necessary documentation, and exploring additional support options, you can increase your chances of securing a loan. Engaging with a mortgage broker or financial adviser can also provide valuable guidance throughout the process. With the right preparation, stepping onto the property ladder can be a more achievable goal.