Advice on applying for a mortgage

sjbyrne16

I'm sorry if this has been covered a million times!
My husband and I are trying to apply for a mortgage and I'm looking for tips to improve our chances. We're paying rent €800 and trying to save €800. We've a joint credit union loan €420 per month and childcare is €800 per month. We're putting everything we have into savings so we're fairly stretched so our current account drops to the min balance by the end of each month! We've only €8,000 saved and we're looking to get approval for €150k so we've still the remaining 10% to save. Is there particular patterns that the banks look at in statements? Neither of us gamble which I know is a serious no no so other than grocery shopping and paying bills we live month to month with no extra money in the current account. Do they frown on this?

D3PO

once you dont go overdrawn your ok.

Make sure your rent is being paid by Standing Order, keep your savings consistent dont "try" and save a certain amount make sure you save an amount. if 800 is a stretch much better to save regularly 700.

Pay off your loan that will be a big issue in terms of your mortgage affordability tbh.

TBH if your paying 800 in rent and struggling to save 800 on top you may struggle to get close to approval with the loan and childcare costs (although we dont know your income so cant say more difinitivly)

Your at least a year away from even being in a position to apply going on your savings anyway tbh.

https://mortgage.aib.ie/mortgageform/mortgage-calculator will give you a rough idea of weather your likely to get approved. I tried yout details with 50 grand salary and it doesnt meet threshold

sjbyrne16

I'm earning €32K and my husband earns €44K.

D3PO

sjbyrne16 wrote: »

I'm earning €32K and my husband earns €44K.

its not really on topic but worth mentioning.

If you havent already you should move ALL your tax credits to your husband.

Hes on the top rate of tax and your not. As a couple you will be far better off financially with him having the credits than you.

vitani

D3PO wrote: »

Make sure your rent is being paid by Standing Order, keep your savings consistent dont "try" and save a certain amount make sure you save an amount. if 800 is a stretch much better to save regularly 700.

Sorry to hijack but in relation to this... I'm saving €600 a month at the moment and have nearly €10k saved. There's some months where I could have an extra little bit left over, say €50-€100. Am I better off keeping the savings at a regular €600 or adding to it when I can afford it?

The €600 goes into my savings the day after pay day every month, so if I was to keep it at that and add the extra towards the end of the month, would it go against me at all? It'll be another 18 months before I'm in a position to start looking for a mortgage, but I want to make sure I'm on top of things now.

D3PO

vitani wrote: »

Sorry to hijack but in relation to this... I'm saving €600 a month at the moment and have nearly €10k saved. There's some months where I could have an extra little bit left over, say €50-€100. Am I better off keeping the savings at a regular €600 or adding to it when I can afford it?

The €600 goes into my savings the day after pay day every month, so if I was to keep it at that and add the extra towards the end of the month, would it go against me at all? It'll be another 18 months before I'm in a position to start looking for a mortgage, but I want to make sure I'm on top of things now.

sorry I guess I wasnt very clear. What I meant was

if 800 is your stretch to the point that you put in the 800 and then as a result of it being a stretch you then ahve to dip into the savings / go overdrawn your much better jsut putting in 700.

If you then have extra at the end of the month yeah dump that in ontop but make sure that your savings arent seen as erratic by saving then dipping into savings and so on so forth.

sorry my fault for not being very clear in what I meant

vitani

Thanks, that makes sense!

Trish56

Hope the following helps.

Create a good savings profile. The bank will be looking for regular savings built up over the previous 6 to 12 months, so start saving early.
Keep a good credit rating. If you have a car or personal loan ensure that you make your repayments on time.
Hold on to your bank statements. You will have to provide your lender with six months of your most recent current account bank statements. If you have to order these you will be charged per statement and it will take some time to get them.
Try and clear any outstanding loans. Try and clear all short-term loans you have before applying for a mortgage as having other loans to repay will seriously impact on the amount you can borrow.
Pay by Standing order/bank transfer. If you are renting, pay by standing order or bank transfer so that the lender has evidence of the payments.

Just done a quick calculation based on the incomes you stated - you qualify for a mortgage of 150k over 30 years. Childcare is treated as a loan.
Stressed repayments would be €947 per month so once you can show this in the form of rent and savings for a period of 6 months. There is no need to put yourself under pressure by saving €800 unless of course you want to build up a deposit quickly.
You can borrow up to 92% so will need a deposit of 8% plus legal and valuation fees circa 2k and 1% stamp duty. Based on a purchase price of 165k you will need savings of circa 17k.
Lenders will also accept a gift as part of the deposit.

Calculation was done assuming you have two children and you are both under 35 and that the income of 44k and 32k is gross basic and does not include overtime, commission or bonus.

sjbyrne16

Thanks a million Trish, that was really helpful.

Benny122

Hi there I'm looking for a bit of advice please!!

I'm in full time permanent employment and enquired about a mortgage this week.

My annual salary is only 24k. I had a 15k loan which I finish in August which I had to pay €300 a month for which was taken out for 5years - I never ever missed a payment and thought this would build up my ICB check.

I have 7k in savings.

We found a place for 98k - it's tiny and it's a two bed in the south of the country. A house went two doors down from it for 78 last week and it was in better condition.

So anyway I ask bank to advise me re my application - they said that they could only offer my 50k based on my income even though I'd be given 30k "gift"

Does this sound right?

Another question I have - the 30k would be from my boyfriend and he's not working at the moment so would we have to make it look like it cam from a blood relative??

Could he give the estate agent a cheque for 30k and I get mortgage for €50k - would that work or would there be questions asked??

robocode

Trish56 wrote: »

Try and clear any outstanding loans. Try and clear all short-term loans you have before applying for a mortgage as having other loans to repay will seriously impact on the amount you can borrow.

Just wondering what you mean by "seriously impact". My girlfriend and I will be hopefully looking for a mortgage in 12-18 months. I have an existing student loan with AIB (~15k, a large part of which was to fund my masters). I meet the repayments every month and it should be cleared in about 5 years (at my current rate) but if it's better to reduce that before saving for deposit then I'll focus on that.

SBarrett

robocode wrote: »

Just wondering what you mean by "seriously impact". My girlfriend and I will be hopefully looking for a mortgage in 12-18 months. I have an existing student loan with AIB (~15k, a large part of which was to fund my masters). I meet the repayments every month and it should be cleared in about 5 years (at my current rate) but if it's better to reduce that before saving for deposit then I'll focus on that.

The bank will take your current loan repayments into account when calculating how much they will lend you. I had a mortgage recently where a €340 a month car loan (only €4,500 outstanding), knocked €40,000 off what they banks would offer her. Unsurprisingly, she cleared the loan.

Steven

shamrock55

I imagine it is a must to clear all credit cards too ?

SBarrett

Yep, they ask for the last 12 months statements. Some of them assume 5% of your credit card limit as a monthly commitment.



Steven

robocode

SBarrett wrote: »

The bank will take your current loan repayments into account when calculating how much they will lend you. I had a mortgage recently where a €340 a month car loan (only €4,500 outstanding), knocked €40,000 off what they banks would offer her. Unsurprisingly, she cleared the loan.

Steven

Ah bloody hell. That's depressing

SBarrett

Unfortunately, it's gone full circle since the Celtic Tiger when they just threw money at people who are now in a situation where they can't service their loans.

I wrote a blog post on first time mortgages recently. I am still a new user here so I can't put up urls so I've copied & pasted it below, so excuse the formatting.



Planning to buy your first home is a big move. As well as the emotional side of deciding to become a home owner, there is a lot of paperwork and criteria to satisfy before a bank will give you a mortgage. This is my guide to help first time buyers guide to get a mortgage.

Deposit

You can borrow up to 92% of the purchase cost of the property from some lenders but most will only give you 90%. This is known as the Loan to Value (LTV). You will have to come up with the rest yourself. You also have to show them that you are able to pay the other transaction costs associated with a house purchase. Stamp duty is 1% of the house value up to €1m and solicitors fees will be up to €2,000. You also have to add surveyors fees of a few hundred.

Most lenders still allow people to be gifted the deposit but the giftor has to sign a declaration stating that they will not look for the money back.

Ability to make repayments

There are stories from The Celtic Tiger of people getting mortgages and not even being able to make the first repayment. That is the type of scenario that banks want to avoid so they want to make sure that you are able to meet your repayments. To do this, they stress test your ability to make the repayments. That is, they look at the rates available today and they add 2% to it. If you can show that you can meet these repayments, you have satisfied this criteria. So, how can you show a bank that you can meet these repayments:

Savings – If you are still living at home, you have to show a regular pattern of savings at the level of monthly mortgage repayments.
Rent – If you are renting, your monthly rent will be taken into consideration as obviously you will stop paying rental income when you start paying a mortgage.
Discounting other loans and outgoings – show them that loans will be paid off before you draw down the mortgage. Loan repayments can seriously reduce the amount that a bank will lend you so it is a good idea to clear all other loans before applying for a mortgage.
Net Disposable Income

Even if you have shown the means to meet the repayments, you have to show that you have enough disposable income afterwards to live on. The amounts vary from lender to lender. One providers amounts are below.

Single Applicant €1,300 per month
Joint Applicants €2,050 per month
Additional for each child €250 per month
Regular Spending Patterns

Lenders want to give loans to people who are responsible with their money. They ask for 12 months current account and savings account statements. It really helps your application if you can show that you live within your means and save regularly every month.

Credit Cards & Overdrafts

You have to provide credit card statements for the last 12 months and your overdraft will be seen on your current account statements. Get rid of your overdraft altogether as this is seen as a loan and will reduce the amount you can get. Use your credit card sparingly and pay off the balance in full every month.

Mortgage applications are a lot more than filling out forms and submitting a load of paperwork. You have to sell yourself to the lenders and show them that you represent a low risk to them. It is essential that you package yourself in the right way and saving regularly is the best way to start.

kells00

Its so hard to get a mortgage, we have been turned down by Ulster and Aib,
the property we want is 145,000
we have 105,000 saved
we are both self employed
no other loans or credit cards
Tax affairs all in order
The accountant even came in with us to the aib
We really thought we would have no trouble getting the loan, call us stupid but we put down nearly 15,000 deposit on the house which we won't get back if we dont come up with the money.
My husband had trouble with the aib years ago when his marriage split up he was ordered by the courts to sign the house over to his ex wife, he did this but she wasnt paying the mortgage so he had no financial claim to it and even if she dropped down dead he would not have got a penny as he signed it over but as there were arrears aib would not take him off the mortgage, the ex has since sold the house and aib got there money.
both of our icb checks came back clear,
sorry ive gone on and on, any advice????

robocode

€105,000 saved and no existing loans, and you can't get a mortgage?! Jesus, I don't stand a chance

lolosaur

get rid of the credit union load asap and get rid of any outstanding loans.

And make sure no bookies deposits or withdrawals (ACTUALLY, JUST NOTHING FROM BOOKIES AT ALL!) not even withdrawals.

you need to prove a propensity to repay. regular payments. same time to same place.

I dont even know if rent is heavily accounted for as a saving anymore. be careful ion that.

3-6 months statements. all looking lovely.

barrow 2k from your ma or da. use it to fund your daily life and lob almost everything into your savings.