- Speak to a broker
“Fail to prepare, prepare to fail” the oft quoted phrase is true in many aspects of life and especially in the mortgage process. Getting a mortgage can be a daunting and lengthy process – whether you are a first time buyer or a trader upper.
You should obtain as much expert advice on the process as you can, as early as possible. We recommend speaking to a mortgage advisor as soon as you are thinking about buying a property. One if the biggest mistakes buyers today make is that they wait until they find a property they want to buy before they even consider the mortgage.
Given that you need at least 6 months account information, you should logically begin planning a mortgage application more than 6 months before you find a property. This way you can ensure your finances are in the best shape they can be. By contacting Pangea Mortgages, you will be able to speak with a highly qualified mortgage advisor who can walk you through what’s required at each step of the journey.
- Have a permanent job
Whilst this may seem obvious, lots of people who work in contract roles or who are still on probation in their current role are surprised when their applications are rejected by Banks. Banks will want you to be in a permanent role and out of your probationary period before they will consider your income for an application.
Even if you are certain to be offered the role or have been verbally told you will get a permanent role, the Banks require EVERYTHING in writing. When making or planning to make a job switch you should consider how this will impact on any application you will be making. For example, some Banks will take in 100% of variable income once you are in the role 3 years – but if you have just started and have a high variable component of your salary – this may impact the amount you can borrow Vs being in a long term role with the same pay.
- Proven Repayment Capacity
Along with the more well known metrics the Bank use such as Loan to Value and lending 3.5x income, the Banks will examine, in great detail, your ability to repay any proposed mortgage. For this they will look at your after tax or nett income. A first time buyer, say on €80k per year, with savings of €30k – would qualify to buy a property for €270k. They meet the Loan to Value and 3.5x income criteria.
But once you go into their nett pay you see it fails the Banks test. The key things that will cause this are 1. Other debts, 2. Children/dependents, 3. High spending
If you have a car loan and a personal loan the Bank will deduct them for your monthly nett pay, so say €3,500 a month nett, the 2 loans are €650 a month – the Bank will assess you as having €2,850 repayment capacity. The next step they will consider is how many people does this income have to provide for day to day? If you have €2,850 a month as a single person this should be more than enough to meet your living expenses, but if you have a partner that’s not working and two children – the Banks will see this a €2,850 needing to cover 4 peoples living expenses! This amount may not be deemed sufficient and you may fall at this hurdle. Many applicants with high incomes are hugely surprised when they fail this test. This is why you should speak to a mortgage advisor as soon as possible and get an understand of how the banks work.
The last hurdle the Banks will look at is over the last 6 months, how much money is left in the current account at the end of each month. Just because you have a high income, and no dependents doesn’t mean you have proven repayment capacity. The Bank will examine your spending habits and if you are consistently living beyond your means and using your overdraft – this may also result in your application being rejected.
The mortgage process is very document heavy. The Banks will not take your word for anything ! Everything has to be shown on paper. First time buyers especially will underestimate exactly how much time this all takes to prepare. In addition to your current and personal accounts, you will need Salary Certs, payslips, ID, Employment summary forms, and many more docs if you are self-employed. It usually takes most people a couple of weeks to pull all this info together. Additionally, any accounts with your name on it, no matter how little money is in it, will need to be provided to the Bank. The main documents that customer fail to provide initially will be Revolut or N26 statements – yes, the Banks need these too!!
- Realistic expectations
In the current housing market, the length of time its taking a first time buyer to go from beginning the mortgage journey to actually moving into the property can be over one year.
You should also consider that the market is very competitive at the minute and there is a huge number of buyers chasing a very small stock of property. So asking prices unfortunately may not be the price the house is sold for. Be prepared for this. Be prepared to miss out on properties – it’s all part of the process unfortunately.
Even once you are Sale Agreed on a property it still takes an average of 4 months to complete all the legal paperwork – this is due to the paper based process of both the legal and Banking industries. It is slow, so please allow time for this.