7 Steps to Get Mortgage-Ready for Your First Home

Here are 7 critical steps to prepare yourself for a successful mortgage application.

1. Clean Up Your Bank Accounts

Lenders will request the last three months of your bank statements to review how you manage your day-to-day finances. They want to see evidence that you're living within your means, paying your bills on time, and not relying on credit to make ends meet.

To strengthen your application, make sure your income is being deposited regularly and is clearly labelled. You should aim to have a consistent surplus left at the end of each month after expenses, as this demonstrates you can manage ongoing mortgage repayments. Consider cancelling or reducing any unneeded subscriptions or discretionary spending in the months leading up to your application.

It's important to avoid unarranged overdrafts or dishonoured payments, as these are red flags for lenders. Banks will cross-reference your declared income and expenses with your actual account activity, so ensure your statements match what you'll state in your loan application. The goal is to show the bank you're a low-risk, financially responsible borrower.

Learn More: The Importance Of Looking After Your Bank Account

2. Confirm Your Employment Status

Stable employment is one of the key factors that banks consider. They need to be confident that your income will continue in the foreseeable future.

To support your application, provide a signed letter from your employer confirming your employment type (whether permanent, full-time, part-time, or fixed-term) and your current income. Include your last three payslips to verify consistency of earnings. If you've received bonuses or commissions in the past two years, provide documentation, though be aware that many banks no longer count future bonuses in their calculations due to economic uncertainty.

Self-employed applicants should submit their two most recent year-end financial statements. Some banks may accept just one year if your business is demonstrably stable and profitable. Contractors and sole traders should also include their IRD tax summaries. Banks take into account the industry you're in, so if your job is in a sector seen as volatile or seasonal, you may need to provide additional proof of income reliability.

3. Gather All Required Documents

A strong mortgage application is built on complete, well-organised paperwork. Missing documents can cause unnecessary delays or even result in declined applications.

You'll need three months of bank statements for all accounts, including savings, everyday, and any joint accounts. Gather your three most recent payslips, or two years of financial accounts if you're self-employed. Valid photo ID is required, typically a passport or a combination of birth certificate and driver's licence.

Prepare your KiwiSaver statements showing your current balance, along with bank savings account statements as proof of your deposit. If you're receiving funds from family, you'll need a gift declaration confirming that the money is a gift rather than a repayable loan. If you've already found a specific property, include the property information pack, listing details, or Sale and Purchase Agreement.

The more thorough and transparent you are with your documents, the smoother the approval process.

4. Speak to a Mortgage Adviser

Mortgage advisers act as a bridge between you and the banks. They understand the different policies and lending criteria of various lenders, and they can match your application to the bank most likely to approve it.

Engaging with an adviser early in your journey can help you assess how much you can borrow based on your income, expenses, and deposit. They can explain the difference between fixed, floating, or split loan structures and help you navigate special loan options like low-deposit First Home Loans. Advisers also provide valuable support when preparing documents and completing applications.

One of the biggest advantages of using a mortgage adviser is that they can save you time by steering you towards lenders most likely to approve your application, helping you avoid unnecessary declines on your credit file. Mortgage advisers are usually paid by the lender rather than by you, so there's no cost to using their service in most cases.

5. Prepare Your KiwiSaver Withdrawal

If you're relying on your KiwiSaver balance to boost your deposit, you'll need to begin the process early to avoid delays.

Getting your KiwiSaver withdrawal sorted early helps ensure your deposit is ready when you need it.

6. Run a Credit Check

Lenders use your credit report to assess whether you're a trustworthy borrower. Any unpaid defaults or past issues can negatively impact your application - even if they've since been resolved.

Check your credit file before applying so you can identify any outstanding debts or defaults that might affect your application. This gives you time to resolve any errors on your report before the bank sees them. If there are negative marks on your file, you may be able to add explanations for circumstances like redundancy or illness that led to past difficulties.

You can request a free credit report from providers like Centrix, Illion, or Equifax. Allow a few days for processing, so factor this into your timeline.

A clean credit file with minimal consumer debt is a strong signal to lenders that you're ready for a mortgage.

Learn More: The Impact of Credit Scores on Mortgage Approval

7. Get Rid of As Much Personal Debt As Possible

One of the most impactful things you can do to improve your mortgage readiness is to reduce or eliminate personal debt before applying for a home loan.

When a bank assesses your application, they look closely at your ongoing financial commitments, not just your income and deposit. This includes credit cards, personal loans, car loans, buy now pay later balances, overdrafts, and even unused credit limits. All of these reduce the amount of income the bank believes you have available to service a mortgage.

What often surprises first home buyers is just how big the impact can be. As a rough guide, every $10,000 of personal debt can reduce your home loan affordability by approximately $50,000. This is because lenders stress-test your repayments and assume those debts will continue alongside your mortgage.

For example, carrying $20,000 of personal debt could mean the difference between being approved for a $700,000 home loan versus $600,000 — which can materially affect the type of property or location you can realistically buy in.

Clearing personal debt not only improves your chances of approval, it can significantly increase how much you can borrow and leave you in a much stronger position when repayments begin.