Tips for getting mortgage ready!
Does your job provide you with a steady income?
Lenders are now looking closely at basic income; bonuses and overtime cannot be guaranteed to be taken into account when a lender is assessing your application. Make sure you have six months of payslips, last year’s P60 and a salary cert completed by your employer (you can obtain a salary cert from your Financial Broker).
How long have you been in permanent employment?
To obtain a mortgage you must have completed your probationary period and you should have at least six months (but preferably twelve months) in continuous employment. Do you plan on remaining in the same geographical area for a few years? If you are planning to move location within the next few years then perhaps purchasing is not ideal for you. House prices can rise as well as fall, as we’ve witnessed within the last number of years, and therefore if you are only purchasing for the short term, the risk of negative equity increases. Negative equity is when the outstanding mortgage on your home is more than the market value of your home. This means that even when you sell the house you will be left with debt.
Costs to consider
Do you have enough money set aside for the deposit, valuation and legal fees, and for furnishing the property? You will be required to have between 10% and 20% of the purchase price of the property you intend buying. You must show the lender evidence on paper – e.g. bank statements and gift confirmation (if any) of this deposit prior to the loan offer being issued. You should also consider the additional costs incurred in taking a mortgage, including the cost of the valuation and the cost of the solicitor. Shop around and find out what the average cost will be: it may vary a little due to location etc. You should never instruct a valuation or solicitor until you get advice from your Financial Broker, as the valuation and solicitor have to be on your lender’s valuer and solicitor panel. Your Financial Broker will have details regarding this.
Showing regular savings
Lenders will require evidence of savings. Not only is this showing that you can live within your means, it also demonstrates good financial planning and an ability to make repayments. Do you have 3 months’ or 3 weeks (if paid weekly) payslips, current and saving bank statements?
When you go to your Financial Broker or lender you should bring with you:
- 3 months’ /weeks’ payslips
- 6 months’ current account statements
- 6 months’ saving bank accout/Credit Union statements
- 12 months’ loan account statements, for all existing loans including existing mortgages
- Recent P60.
Watch out for
Check that you have not had any unpaid direct debits or standing orders on your statements (these are sometimes denoted by referral fees). If there are unpaid direct debits or standing orders, check why this occurred and explain this to your Financial Broker/Lender. Doing this can save a lot of time later in the process.
Show ability to repay
Can you show ability to repay i.e. paying rent? You can demonstrate an ability to repay by showing a strong savings history and strong payment history, i.e. ability to pay a specified rent each month. It is important that the rent and savings transactions can be seen on your bank account statements. Loans which have recently been paid off are also useful to show ability to repay.
Do you live within your means, avoiding overdrafts? If you have an overdraft, check your six months bank statements and ensure you are not continually falling into the overdraft. If you do not have an overdraft, ensure that you have never overspent and initiated an unauthorised overdraft.
Check also that you have not been “living from one pay cheque to another”. If this is the case, very strong savings records may help.
How is your credit history?
Don’t forget – if you are unsure about your credit history or if you missed payments in the past, log on tohttp://www.icb.ie/and pay a small fee to get your credit report sent directly to you. You should show this to your Financial Broker/lender when applying for a loan.