What steps should I take now, to be accepted for a mortgage in 4/5 years?

wherearewe45

I'm not in a position to buy a house now but I do plan on buying in a few years time. Just wondering what steps/actions I can start taking now to make things run smoother for me when I do approach a bank looking for a mortgage.

That I know of, I'll need:

-10% deposit as a FTB (minimum)
- previous 6 months of good activity on my current account (steady income/no risky payments (gambling, etc)

What else will look good, that I can start building towards now?

Lumen

Build up some good credit history.

http://www.citizensinformation.ie/en/money_and_tax/personal_finance/debt/credit_ratings.html

Bob24

They'll also look for regular savings (but they won't go 5 years back).

wherearewe45

Bob24 wrote:

They'll also look for regular savings (but they won't go 5 years back).

Is a credit union ok for this? I've bn saving +€500 a month for 2 years, it's bn going out of my account into a CU by direct debit.

Bob24

wherearewe45 wrote: »

Is a credit union ok for this? I've bn saving +€500 a month for 2 years, it's bn going out of my account into a CU by direct debit.

I am not 100% sure as never experienced myself, but I don't see why they wouldn't accept it as long as you can get an official statement for it which shows the inbound transfers.

368100

wherearewe45 wrote: »

Is a credit union ok for this? I've bn saving +€500 a month for 2 years, it's bn going out of my account into a CU by direct debit.

Ideally you should save what the monthly mortgage payment you expect to pay...with a little extra to allow for stress test, although they'll only usually look for a 12 month history of this so you've plenty of time

Bob24

368100 wrote: »

Ideally you should save what the monthly mortgage payment you expect to pay...with a little extra to allow for stress test, although they'll only usually look for a 12 month history of this so you've plenty of time

Knowing as well that if you are paying rent they will also count this alongside your monthly savings to determine your repayment capacity (as obviously once you buy rent payments will stop).

So regardless of someone paying 1000 in rent with no monthly savings, 1000 euros savings but no rent (living with parents), or 500 euros savings and 500 euros rent ... I think as far as the bank is concerned those are all the same and the person has a proven repayment capacity of 1000 euros per month.

missmatty

If you have your money in more than one bank or account I'd combine some of the accounts now to save hassle. I have two current accounts in separate banks and a savings account in a third and it's a pure pain getting statements from all of them each time we go to renew our approval for the mortgage.

Sarn

missmatty wrote: »

If you have your money in more than one bank or account I'd combine some of the accounts now to save hassle. I have two current accounts in separate banks and a savings account in a third and it's a pure pain getting statements from all of them each time we go to renew our approval for the mortgage.

It is definitely time consuming. I had five accounts, closed the sixth to make it a bit easier. Of course none of the accounts were with our mortgage lender to add to the fun!

Samuel T. Cogley

Get the Credit Union or similar into a 21 or ideally 60 or 90 day notice account so that you can't touch it without serious thought. Make sure to have some emergency funds outside of your savings, otherwise all looks good, make sure not to get any debt other than a credit card which you pay off in full each month.

eire1

Lumen wrote: »

Build up some good credit history.

http://www.citizensinformation.ie/en/money_and_tax/personal_finance/debt/credit_ratings.html

One of my friends suggested that I should take out a CU loan even though if I wouldn't need it and then pay it back early to show good repayment history.

Samuel T. Cogley

eire1 wrote: »

One of my friends suggested that I should take out a CU loan even though if I wouldn't need it and then pay it back early to show good repayment history.

We never had any loans and didn't have an issue - seems an expensive way of showing repayments IMO.

myshirt

If anything, get a small credit card, use it, and pay it off each month on time. Don't get a credit union loan at 10% that you don't need.

Something you can look at is putting your money into a fund that invests in property. Your fortunes rise and fall with the tide then. One of the challenges people find is the price of houses is growing faster than they can save. That 10k you save in a year is only worth 9.5k effectively by the time you have it saved.

awec

I don't know if I'd bother building a credit history unless your income is low and you feel you're going to be borderline.

I don't have a credit card and have never had any sort of loan in Ireland and I had no problems.

Bob24

awec wrote: »

I don't know if I'd bother building a credit history unless your income is low and you feel you're going to be borderline.

I don't have a credit card and have never had any sort of loan in Ireland and I had no problems.

Same here. Never had any loan or credit card in my life and it was no problem to get a mortgage.

eire1, I would ignore the person who advised you to borrow money for the sake of borrowing.

jimmycrackcorm

Bob24 wrote:

eire1, I would ignore the person who advised you to borrow money for the sake of borrowing.

Having a history of paying of credit on time is actually a good indicator.

Using the credit card by paying off the balance every month is very good as it also demonstrates the discipline when there might be a temptation to take advantage of the credit facility.

Senecio

5 years is a long time. I would suggest now you should focus on your career. Do whatever you can to increase your earning potential. Be that upskilling, retraining or just looking to move up the ladder in your current employer or elsewhere. Goes without saying that extra earnings need to be put to good use.

Bob24

jimmycrackcorm wrote: »

Having a history of paying of credit on time is actually a good indicator.

Using the credit card by paying off the balance every month is very good as it also demonstrates the discipline when there might be a temptation to take advantage of the credit facility.

Being able to manage your affairs without having to contract any kind of short/medium term debt to pay for daily expenses or for things other than a house/investments is an even better sign of financial discipline in my book.

But I think as far as the bank is concerned the main concern they would have is either if you have a track record of bad repayments or if you have any type of pending loan at the time of the mortgage application (which would reduced your repayment capacity for rhe mortgage).

In any case to fo back to the pracrical point, definitely don't have to build a credit history for the sake of having one. I know of several people who got mortgages without ever having had any other loans in Ireland before.

carleigh

Any type of consistent savings (whether it is now spent or not) is looked at. We were saving for a wedding for 2 years and even though it was all spent when we applied for the mortgage (1 month after the wedding), being able to show the lodgements every month and that any expenditure was actually wedding related really helped. We got our approval within a few weeks and bought a new build, hoping to move in next month.