If you are a contractor in New Zealand, you may find it challenging to secure a home loan due to the nature of your work. Unlike regular employees who receive a stable income, contractors often have irregular income streams, which can make lenders hesitant to approve their loan applications. However, that doesn`t mean you can`t qualify for a home loan as a contractor. In this article, we`ll outline the contractor home loan requirements in NZ to help you understand what lenders are looking for and how you can increase your chances of approval.
1. Current Contracts
The first requirement for a contractor home loan in NZ is to have current contracts in place. Lenders will want to see that you have a steady stream of income and that you are likely to continue earning that income into the future. Having multiple contracts with different clients can help demonstrate your financial stability and reduce the lender`s perceived risk.
2. Financial Statements
Contractors are often required to prepare financial statements for tax purposes, but these statements can also be useful in securing a home loan. Lenders will want to see your income and expenses, as well as your tax returns for the past two years. This information can help show lenders that you have a reliable source of income and that you`re responsible with your finances.
3. Good Credit History
A good credit history is essential when applying for any type of loan, and it`s no different for a contractor home loan in NZ. Lenders will check your credit score to see if you have a history of making payments on time, managing your debts, and avoiding defaults. If you have a less than perfect credit history, you may still be able to qualify for a home loan, but your options may be limited, and you may face higher interest rates.
Like with any other home loan, you`ll need to have a deposit saved up to qualify for a contractor home loan in NZ. The minimum deposit required is 20%, but having a larger deposit can help you secure a better interest rate and give lenders more confidence in your ability to repay the loan.
5. Evidence of Future Work
Lenders will also be interested in your future work prospects as a contractor. If you`re able to provide evidence of upcoming contracts or projects, this can help demonstrate your financial stability and increase your chances of being approved for a home loan.
In summary, securing a home loan as a contractor in NZ is possible, as long as you meet the lender`s requirements. Having current contracts, financial statements, a good credit history, a deposit, and evidence of future work can all help increase your chances of approval. If you`re struggling to meet these requirements, consider speaking with a mortgage broker who can help you find a lender that`s willing to work with your unique financial situation.