First time buyers

Lini1981

How hard is it to get mortgage?

-Have savings with partner
- I do have overdraft which I use but pay back when paid
-no outstanding loans

Lini1981

Lini1981 wrote: »

How hard is it to get mortgage?.............

Income, how much savings you have and how they were accrued along with amount you wish to borrow are the main factors, along with how long you want to pay it back.

catrionanic

First thing you need to do is stop using that overdraft. Then pay off any other loans you may have, and if you use any online gambling sites, stop (banks hate any evidence of gambling). Basically, the banks want to see evidence of sensible spending habits and financial stability. Regular monthly savings, and no withdrawals from your savings account, is also important.

What a bank will lend you will largely depend on your salary. They'll lend 3.5x your income. If you are on a high salary or have a lot of savings, you may qualify for an exemption.

So it's hard to say how easy or hard it is to get mortgage approval, as this depends so much on your financial history and spending habits.

LirW

Also savings history, they want at least 6 months of steady savings history.
You need 10% of the purchase price yourself as a deposit.
They will stress-test your mortgage with around 2% more interest.

3.5x your gross income is the max you can borrow unless you qualify for an exemption (large income, large deposit). If you both let's say earn 50k gross a year, the bank will lend you up to 175k. Add your savings and this is what you can spend. A bank wants a couple to have at least 45k combined income to approve a mortgage.

If you have children that'll lower the amount that you can borrow.

A bank assumes you need roughly 1200 euro per adult per month, add 250 for every child in the mix. Everything above that is the amount you can afford to repay.
You both need permanent contracts in work, if one is a contractor there needs to be a history of permanent income.

Also don't forget the legal costs for a solicitor, land registry, moving van etc.

Lini1981

catrionanic wrote: »

First thing you need to do is stop using that overdraft. Then pay off any other loans you may have, and if you use any online gambling sites, stop (banks hate any evidence of gambling). Basically, the banks want to see evidence of sensible spending habits and financial stability. Regular monthly savings, and no withdrawals from your savings account, is also important.

What a bank will lend you will largely depend on your salary. They'll lend 3.5x your income. If you are on a high salary or have a lot of savings, you may qualify for an exemption.

So it's hard to say how easy or hard it is to get mortgage approval, as this depends so much on your financial history and spending habits.

Thanks, wont be purchasing for another 2 or 3 years just wanted to get on good track before we apply.

Taylor365

Lini1981 wrote: »

Thanks, wont be purchasing for another 2 or 3 years just wanted to get on good track before we apply.

Get rid of the overdraft and get a credit card.

Pay it when you receive the bill every month to build up good credit.

commited

Taylor365 wrote: »

... to build up good credit.

Was told by 2 banks that this was total folklore - they advised that having no previous credit is the same as having paid off a loan previously, as long as you have good savings history to back it all up.

100% agree with getting rid of the overdraft though, a credit card is better for cashflow but make sure you pay it off in full every month

Cuddlesworth

commited wrote: »

Was told by 2 banks that this was total folklore - they advised that having no previous credit is the same as having paid off a loan previously, as long as you have good savings history to back it all up.

In America everything you do is defined by your credit score, which in itself is a calculation of how much debt you have and if you missed any payments. The interest rate you pay and the amount you can borrow is mainly based upon the credit score you have.

So if you move to the states going into a job that pays a substantial sum of money and have a large savings account, you won't get a mortgage because you have a bad credit rating. You have to go out and get loads of credit cards, get some car loans, build up as much debt as possible and start paying it off at high interest rates. After 6 months when your score improves, you can renegotiate lower interest rates and after a while qualify for a mortgage(which is really a effective way of keeping people poor).

Over here they look at your earnings and your ability to repay against any history of bad debts for loans.

So when you see people advising to get credit cards and pay them off, they are really just repeating third hand information from the states.

Snoopy1

I got a mortgage with 3000 in savings, 3000 owed on a loan, and a credit card.

Cuddlesworth

Snoopy1 wrote: »

I got a mortgage with 3000 in savings, 3000 owed on a loan, and a credit card.

When? Because banks and the Central Bank actually have to do their job now.

Snoopy1

Cuddlesworth wrote: »

When? Because banks and the Central Bank actually have to do their job now.

4 months ago

awec

Having a loan and credit card is not a problem once you show you repay it every month and you have enough income each month to cover it and the mortgage even with the stress testing.

Cuddlesworth

Snoopy1 wrote: »

4 months ago

Looking over your post history you got a exception on the deposit requirement based on the fact that your repayments for the loan were 16% of your net income, that it would only be 2 years before getting your required 10% equity(meaning you are no longer a "exception") and the loan itself was pretty small on the scale of things.

I'm going to assume you also forgot about that other 7k in savings.

JagoMoon

Just a quick question if anyone can help. Will a monthly bonus received through work be eligible to be used towards the 3.5 times salary?

catrionanic

JagoMoon wrote: »

Just a quick question if anyone can help. Will a monthly bonus received through work be eligible to be used towards the 3.5 times salary?

Bonuses are discretionary and not guaranteed, so no. Unless you can negotiate a salary increase instead of the bonus, the banks won't be counting it.

Mickiemcfist

Cuddlesworth wrote: »

Looking over your post history you got a exception on the deposit requirement based on the fact that your repayments for the loan were 16% of your net income, that it would only be 2 years before getting your required 10% equity(meaning you are no longer a "exception") and the loan itself was pretty small on the scale of things.

I'm going to assume you also forgot about that other 7k in savings.

God I love when this happens 😂

flashforward

catrionanic wrote: »

Bonuses are discretionary and not guaranteed, so no. Unless you can negotiate a salary increase instead of the bonus, the banks won't be counting it.

Regular bonuses can be counted by the bank @ the 3.5times multiple...

The banks work status enquiry forms have details to be entered for bonus information. E.g. Ulster Bank look for the annual average over the past 2 years.

flashforward

See link below, Bonuses used for LTI calculation @ 3.5times.

https://www.ulsterbankintermediaries.ie/lending-criteria/acceptable-income

Heart Break Kid

To be honest it wasn't that hard to get approval. We have a lot of short term finance options but it didn't effect our application. We managed to get 4.4 times our income value. We just saved 3 times what we would need for a montly mortgage payments for around at least 15 months. This gave us at least 10% for deposit. We also saved another 2-3% for renovations.

(Not possible without living with folks unless you've got a solid earning job, never wouldv'e happened if we rented).

The real though bit is getting a house you can afford and actually want.

flashforward

Heart Break Kid wrote: »

To be honest it wasn't that hard to get approval. We have a lot of short term finance options but it didn't effect our application. We managed to get 4.4 times our income value. We just saved 3 times what we would need for a montly mortgage payments for around at least 15 months. This gave us at least 10% for deposit. We also saved another 2-3% for renovations.

(Not possible without living with folks unless you've got a solid earning job, never wouldv'e happened if we rented).

The real though bit is getting a house you can afford and actually want.

4.4 times is significant.
How much were ye managing to save per month living at home?

Cuddlesworth

flashforward wrote: »

See link below, Bonuses used for LTI calculation @ 3.5times.

https://www.ulsterbankintermediaries.ie/lending-criteria/acceptable-income

They are the only ones I have encountered that included bonus payments + OT. Others just take them into account for exceptions.

Heart Break Kid

flashforward wrote: »

4.4 times is significant.
How much were ye managing to save per month living at home?

60% of everything we made. The extra multiplier made a difference of living a good 40km from our families/town to 10Km.

As for overtime I know some banks would consider it but it has to be guaranteed income. Partner made an extra 10% in O/T but it wasn't taken into account as it wasn't guaranteed on her contract.

DaveyDave

Hi all, similar question here. Can you really only get 3.5x your salary? I've done some mortgage calculators online and they're only showing a max of around €270,000 and a €30k deposit if I recall. We'd be looking at needing anywhere between €330-350k based on the area we're living now.

The calculation above is €1,100 a month and we're paying €1,450 rent. No doubt we can afford to pay it and we're on track to have €40,000 saved in the 2 years and this is including me paying €325 a month for car finance. At the rate we pay rent it would clear that mortgage in 22 years.

Is it possible we could be approved for more? We could save more but we just want to get out of renting at ridiculous prices. In 3 years time I'll need a deposit for another car and would rather not still be saving for a mortgage deposit with the €40k we'll have at the time.

I'm on €38k and she's on €23k but with commission is closer to €30k. Would they just look at her basic salary or an average of what she earns?

Michael D Not Higgins

@davey
At the price your looking for (330-350k), you'd need the bank to consider your partner's full income as well as an exception to the rules to the full 4.5 times income. This is before they consider any additional costs like if you have any kids. Your best bet is to speak to a bank and see if you're a good candidate for an exception.

James 007

DaveyDave wrote: »

Hi all, similar question here. Can you really only get 3.5x your salary? I've done some mortgage calculators online and they're only showing a max of around €270,000 and a €30k deposit if I recall. We'd be looking at needing anywhere between €330-350k based on the area we're living now.

The calculation above is €1,100 a month and we're paying €1,450 rent. No doubt we can afford to pay it and we're on track to have €40,000 saved in the 2 years and this is including me paying €325 a month for car finance. At the rate we pay rent it would clear that mortgage in 22 years.

Is it possible we could be approved for more? We could save more but we just want to get out of renting at ridiculous prices. In 3 years time I'll need a deposit for another car and would rather not still be saving for a mortgage deposit with the €40k we'll have at the time.

I'm on €38k and she's on €23k but with commission is closer to €30k. Would they just look at her basic salary or an average of what she earns?

*What if interest rates go up, could you afford repayments above €1,100?

*What if one of you looses your job, how secure would both your jobs be in a recession (ie. permanent teaching, garda, nursing etc. council etc.)

*Why do always people look for more, can you afford to pay more during a recession and during an interest rate hike, €1,100 could become €1,500?

*Kids?

*Buy what you can afford, but stress test yourself too

Cuddlesworth

DaveyDave wrote: »

Hi all, similar question here. Can you really only get 3.5x your salary? I've done some mortgage calculators online and they're only showing a max of around €270,000 and a €30k deposit if I recall. We'd be looking at needing anywhere between €330-350k based on the area we're living now.

The calculation above is €1,100 a month and we're paying €1,450 rent. No doubt we can afford to pay it and we're on track to have €40,000 saved in the 2 years and this is including me paying €325 a month for car finance. At the rate we pay rent it would clear that mortgage in 22 years.

Is it possible we could be approved for more? We could save more but we just want to get out of renting at ridiculous prices. In 3 years time I'll need a deposit for another car and would rather not still be saving for a mortgage deposit with the €40k we'll have at the time.

I'm on €38k and she's on €23k but with commission is closer to €30k. Would they just look at her basic salary or an average of what she earns?

2 Adults, banks usually value spending at 1k spending per month per adult including bills, fuel, car tax, insurance, clothing, food etc.
So, 2k a month spending roughly

Mortgage at 350k, 310 principal + 40k saved.
Projected mortgage payments = 1200 + stress test @5% = 1560k a month
House maintenance(repairs etc) = 50 a month (thats pretty low)
Property tax = 50 a month.
House insurance + mortgage assurance = 60 a month

So we are at 3720k a month stress tested. Add 325 a month for car finance, so we are at 4045k per month spending stress tested.That leaves you with around 500 quid a month "to spend" in bad times or 800 in good times. Or another way of looking at it, no savings at all, a new house that needs things and spending roughly 85% of everything you earn.

But that can't be right, because you earn roughly 4500 a month after tax right now. And you reckon you can hit 40k savings in two years. Assuming you have nothing now(hope not), that's around 1600 a month saved. Which means you spend 2900 a month right now including the car loan and intend to save only 35% of your base wages on the biggest purchase of your life.

If you want some advice. Rent for a while with your girlfriend, relationships can change when you live with people. Get smarter with your money, you spend too much. And when you want to buy a house, make sure you have enough money that you can buy a house you actually want to live in for at least a decade. And don't worry about house prices shooting up, the higher the climb the harder the fall. Your in a good position now to have a nice sum of money waiting for it.

LirW

I'm quite certain you wouldn't qualify for an exemption but no harm in asking. Exemptions are usually offered to people with a very high combined income that already have a high deposit.
Keep in mind that with all the maintenance costs for the mortgage and the house bump your monthly costs up a good bit. When you repay 1100 euros you have insurances, bin charges, property tax on top of that and you should also keep a bit aside each month for maintenance of the house (classic example: roof leaks, needs immediate repair).
I can only urge you to not borrow more than you comfortably can afford to repay even if interest would go up.

DaveyDave

Thanks for all the replies guys. As I said I'm new to this so have a lot to learn.

Stress testing, is this always 5%? I'll have a look into property tax and house insurance too.

I think the outgoing expenses figures might be off though, I don't believe I spend too much money. I spend what I have to on rent, basic TV/internet package, cheap phone bill etc. Spend very little on food, keep gas/electricity usage down where possible etc. Only thing that could go down would be rent and I don't see that happening. I myself will save about €1,200 a month after rent, bills, car, food, fuel, socialising. I actually end up with more than that because food and our gas/electricity is always less than I budget for.

It sounds like we'll need a bigger deposit which is fine, we'll just keep saving and I'll use that time to educate myself more

LirW

Don't take it for gold but as far as I know they stress test your repayment ability with +2% interest on the mortgage you wanna take out.

House insurance: not every house can be insured. Certain constructions won't get insured (for example, flat roofs or Thatched properties would have it very hard finding an insurance provider). Or when the house is built in a flooding area for example. I know that plenty of houses in Carlow town are built in flood zones and won't get insurance. Check out the flooding map online. I can only advise to have building and the contents insured and it's quite common to slightly overestimate the worth of your contents.
You also need either a life insurance or at least mortgage protection.

If you want to look at property tax, Revenue has a map online (I think it's the calculator) that says how much property tax you have to pay for different properties in different areas. A 3bed in Cavan for example pays a lot less Property tax than a 3bed within the M50.

myshirt

How are you saving 40 grand over two years while paying 1,450 in rent? That is some going.

DaveyDave

myshirt wrote: »

How are you saving 40 grand over two years while paying 1,450 in rent? That is some going.

The 40 grand will be our combined savings. Things could change but that's what we're on track to have.

I don't spend out on clothes or anything. I set aside money each week for the likes of socialising, a takeaway or a haircut. If I want something like a PlayStation game I'll save it for as many weeks necessary. Anything I don't spend gets added into savings or pays a bill.