Buying a home for the first time can be a daunting task, saving is not easy and searching for a home and the bidding process can be tricky.
Mortgages are also another part of the process that you will not have experienced before. Our aim is to help cut through the technical words and to help you understand how to make a successful application for mortgage approval.
Preparation is key and knowing what a bank looks for when it comes to a mortgage application will allow you to present the positives and sail through approval.
Let’s start with the three core pillars of mortgage lending -
- Income
Central Bank (macroprudential) lending rules allow banks lend up to 4 times allowable income to first time buyers, 3.5 times to second time buyers.
Income needs to be from a sustainable source i.e. permanent or long term contract or if you are self employed most lenders will take an average of your last two years tax returned income.
The amount banks may lend to you can differ based on their interpretation of your income. This is particularly relevant if you are someone with variable income such as overtime, bonus, commission, shift allowance or RSU’s.
It is really important that you do your research or seek market based advice from a mortgage broker such as doddl to understand what each lender will offer you and what your maximum borrowing potential is.
- Deposit
Deposit for all purchasers is 10% of the purchase price.
For first time buyers purchasing new build homes and eligible for the help to buy, this scheme can go towards your deposit. The help to buy scheme is a rebate of the tax you have paid in the last four years and can be up to 10% of the purchase price capped at €30,000. You apply for it via MyAccount on Revenue.ie and you do not need to have a property in mind to apply to see how much you are eligible for.
You will also need to have stamp duty (1% of the purchase price up to €1,m and 2% on the amount above) and funds for legal fee, surveyor costs etc. We would always suggest having a further 2% of the purchase price to meet these transaction costs to purchase your new home.
- Clear evidence of repayment capacity
All but one lender (Nua Money) will only lend if you can demonstrate that, in the six month immediately preceding application, that you can afford the proposed mortgage. This is by way of monthly savings, or rent currently being paid or in some cases loans that will be discontinuing.
The key here is consistency, you must show repayment capacity consistently each month, no missed months, no dipping into savings etc.
As a rule of thumb for every €100,000 you want to borrow you should show repayment capacity of €500 per month. Example €400,k mortgage, €2,000 per month repayment capacity.
Once you show solid income, strong repayment capacity and you have your deposit in place there should be no reason why you cannot secure mortgage approval.
There are now 11 lenders in the Irish mortgage market, it is really important that you do your research or work with a broker such as doddl to help you secure the best mortgage for you.
Do you know how doddl work?
At doddl we are a team of over 50 mortgage and life assurance specialists working with clients from enquiry right through to when they get their keys. We work with all major lenders and our role is to understand your requirements and to find the best mortgage to suit you.
We do not charge a fee as, like all brokers, we get paid by the lender you choose to take your mortgage with. We get the same payment regardless of the lender which ensures no lender or product bias on our behalf.
If you don’t know where to start then speak with our team, mortgages are what we do!
