Your husband's stable income as a sole trader ($110k/year) enhances your mortgage application, but potential lender concerns may arise. Consult a mortgage advisor, maintain transparency with banks and family, and compile comprehensive documentation for a smoother approval process and favorable terms.
___________________________________________
“So we have been looking to buy a house for a while and finally found one (desperate owners want to sell, asking price is currently 15% under CV). The thing is, we need to take out a small loan of around $200k. My husband is a builder (sole trader), making full-time contracts for more than a year, so I have a steady and stable income of around $110k/year; I’m a SAHM with a toddler. We don’t have any debts (no school loan, car fully paid off). Do you think we have a high chance of getting approved? Which bank do you recommend? We have another option to borrow from family but would rather check with the bank first. My husband thinks it is easier to get bank approval by borrowing from the family, buying the house, then going to the bank to get the loan, and paying the family back afterwards. What do you think?”
___________________________________________
Financial Stability as a Sole Trader:
Your husband’s stable income as a sole trader, earning around $110k/year, is a positive factor in your mortgage application. However, being a sole trader might raise additional questions from lenders about the stability of the business. It would be advisable to consult with a mortgage advisor who can help navigate the complexities of your specific situation and guide you on how best to present your financial profile to potential lenders.
Transparency with Banks:
When approaching banks, it’s essential to be transparent about your plans, especially if you are considering borrowing from family initially. Some banks may have specific policies regarding the source of your deposit, and they may want to ensure that you haven’t incurred any undisclosed debts. Additionally, having an explicit, written agreement with your family outlining the loan terms is crucial, as this documentation may be required when you eventually apply for a mortgage.
Documentation is Key:
Gathering all necessary documentation, including tax returns, bank statements, and business financial statements, will be key in the mortgage application process. This information will give lenders a comprehensive view of your financial stability. Seeking pre-approval from multiple banks will provide insight into the amount you can borrow and help you compare offers to find the most favourable terms for your situation.
In conclusion, while your husband’s stable income is a positive factor, it’s essential to proactively address potential concerns and seek professional advice to increase your chances of mortgage approval. Open communication with both family members and possible lenders will contribute to a smoother process as you navigate the steps toward purchasing your new home.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
