With it getting closer and closer to move in day (I feel sick with excitement just saying that.) One recurring topic that seems to pop up when discussing the prospect of a new house is Mortgage applications and approval.
We’ve heard a lot from family and friends and even so much in the news about how hard it is to get approved for a mortgage. However for us we found that for us that wasn’t the case, Why? Because we were organised and had been getting ready for it previous before applying.
Currently in Ireland for first time buyers, the deposit is 10% of the house price up to €220000 and then 20% of the remaining price after €220000.
Obviously having your deposit is key so get saving but just because you have the savings doesn’t mean you will automatically get approved. It’s about affordability and having your finances in order. You can’t have one without having the other.
I’m going to give my top tips to get your self ready and sorted for the next step and tell you how you can make this stage of planning to buy a house a lot easier and less stressful.
- Be wise with your bank transactions. After choosing which mortgage supplier you want to go with.(note it’s worth setting up meetings with numerous banks etc to find who suits you best to go with) you will be asked for bank statements. Where they will go through them and check out your ingoings and outgoings. Here’s where to get smart. For things like paying rent, bills,loans even, do it all through your bank with direct debits or standing orders. This way your mortgage supplier can see that you are consistent with paying your bills and can see where your money is going. For me all that was payed through Conor’s account but you would see on my statements a monthly standing order for my amount of the bills from my account to his. Then there’s the other aspect of that, recreational spendings. For instance going out on a night out. It would be best to go to the ATM and taking out €80 or what ever you plan on spending and just use cash for that rather than having lots of little transactions of €12 here €15 there and having God forbid “Coppers” coming up on your bank statement. The same goes if you plan on going on a little shopping trip of whatever, seeing RiverIsland and H&M pop up a lot doesn’t look great either. Though I’m not saying take out €500 for the pass machine because that’s just silly. You shouldn’t be spending like that of your buying a house unless your loaded, in that case enjoy! Checkout a recent post I wrote about my top tips for saving but still having a life Here
- Credit History. Another reason to have your bank statements in order is because you mortgage provider will look back at least 6 months through all your accounts and do a credit check. Make sure you have no outstanding or late bill payments,missed payments on loans, over dream on your account or anything else of the same sort. Missed payments or unpaid items can be seen as you having “bad credit history” Also before you will be given your mortgage you will have to clear off any losns you may have.
- Earnings/ cost of living. It’s not always about what you earn, it depends on the price of the house and your situation, number of dependants etc. How the mortgage people decide on the amount of loan they give you is by assessing the price of the house, your deposit and your “affordability“.This means being able to afford not just your mortgage repayments but everything else in life too. They work out your “stress rating” where they take into account that can you pay your mortgage back along with paying your bills etc, living life and still being able to save. For example in one of our meetings we worked out if we were to have a baby, could we still afford all the outgoings on one wage. Another example of your mortgage repayments where to be €1200 they need to see if you could afford up to €1800 a month if anything personal or economic was to happen.
- Employment. Pay slips, get prepared to get asked for a lot of these. Make sure to have them ready. When applying for a mortgage, usually you would have to be in a current job for at least 6 months or pass your probationary period. They want to know that you are in a secure job. This will be slightly different for anyone who is self employed. You will need to speak with your mortgage supplier about that. If you are thinking of moving job for a better position or a pay increase, don’t let that stop you. Houses will always be there. It may not be the exact one you are looking at but don’t hold off on better job prospects just so you can get a mortgage. Get yourself the job and then after a few months then start the process of applying.
The steps for buying your first home cut down in short. Get your s**t together, bank statements, paper work etc. Pick your mortgage provider. Fill in a lot of forms. Then you get mortgage approved “in theory” where you will get a “loan offer” for X amount of money. This amount with the amount of deposit you need ( first time buyers, the deposit is 10% of the house price up to €220000 and then 20% of the remaining price after €220000.) will decide on the price of the house you can go for. For us we had the house picked, we then had to wait for our “loan offer” once that was set we went ahead with signing for our mortgage. You will need a good solicitor to help everything run smoothly and to go over all the paper work. Once your mortgage is signed you need to organise life insurance, which in you need to have before the back will hand out any money.
So these are just my little tips and easy explanations of the whole process, I hope it helps in any way.