Applying for a mortgage can be a detailed and time-consuming process. The bank is eager to see that you can afford to take on a mortgage repayment and still have enough money left each month to enjoy your new home. To help you prepare for this process we have compiled a checklist to ensure that your application is successful.
Your income - lenders will look at your annual income and some may take bonuses or overtime into account. Some lenders may factor in rental income if you plan to rent out spare rooms.
Outstanding loans/Credit record - if you have other loans, this may reduce the amount of money you can borrow. Keep credit cards and personal loans paid on time. Missed repayments could affect the amount you can borrow for your mortgage and also your credit history.
Savings Having a regular savings account in which to save your deposit is important. The bank will also take into account if you are paying monthly rental payments on a property – it demonstrates your ability to support this level of monthly repayments. You should arrange to pay your rent through your bank account – even if you are living at home and making a contribution to the household.
Day-to-day finances Make sure you manage your accounts so that you don’t go over your credit limit – this shows that you have been able to manage your finances effectively for a period of time before you apply for your mortgage. Lenders will look at any financial commitments you have, such as childcare costs.
The value of your house - this is the market value, or purchase price of your house.
The amount you need to borrow - this is the difference between the amount you have saved to put towards the house (your deposit), and the purchase price of the house.
Additional costs You will need to show how you can cover additional costs such as stamp duty, legal fees, valuation fees and any additional expenses that might arise during your application process.
If you are a first-time buyer, a 90% limit will apply with a 10% minimum deposit. If there are two parties applying for the mortgage, both must be first-time buyers for the mortgage to be considered for these advantages. A Help-to-Buy incentive is also available and it is designed to assist first-time buyers with obtaining the deposit required to purchase or self-build a new house or apartment to live in as their home. It provides for a refund of Income Tax and Deposit Interest Retention Tax (DIRT) paid over the previous four tax years to first-time buyers. See the Revenue website for further information.
If you are not a first-time buyer, different rules will apply. A lender may lend up to 80% of the value of the property that you wish to buy. This means you need to have the remaining 20% saved for your deposit. Banks do have a discretionary option to allow some applicants to apply outside of this criteria.
To be continued...