Getting on the property ladder seems overwhelming. There are loads of formalities and paperwork that need to be carried out in order to take out a mortgage. Since you have no prior experience about applying for a mortgage, you might be worried about frauds and deception. Well, there is free mortgage advice available on the internet. You can also consult a mortgage advisor who would enlighten you about available options tailored to your current financial needs.
Before you apply for a mortgage, you must know the eligibility criteria. A mortgage is not like a small personal loan, which is not challenging to apply for despite a subprime credit rating. Here are the conditions that you need to meet in order to get approval for a mortgage:
- You must have a decent credit score to be eligible for lower interest rates.
- You must have minimum of 10% of the total market price of a house as a deposit.
- If your credit score is not up to scratch, you will have to arrange a larger down payment. You will require minimum of 20% of the total market price.
- You should not owe any other debt obligations when applying for a mortgage.
- Make sure that you have not taken out payday loans in the previous two years from the date of the mortgage application.
The eligibility criteria vary by mortgage lenders. For instance, some providers expect only a 5% deposit while others require a minimum of 10% despite a stellar credit rating.
Tips for climbing the property ladder as a first-time buyer
If you are looking for mortgage loans in Ireland as a first-time buyer, you should consider the following tips to make the whole process a bit easier.
Calculate your affordability
First off, you should try to calculate how much money you can afford to pay back. While you are to deposit 10% of the total cost of the market price, you will be paying interest on the loan to value for the next 10, 20 or 25 years, depending on the repayment term your lender has set for you.
It is vital to understand that mortgages come with a fixed interest period, only for five years; however, most lenders do not extend the period beyond two years. It means as soon as your fixed interest period deal comes to an end, you will be put on a standard variable interest rate deal.
Your mortgage interest payments cannot be the same for two months. This is because interest rates depend on the base rate. If you are on a tracker mortgage, your mortgage interest rates will align with the base rate, but if you are on a standard variable interest rate, no lender is obligated to reduce interest rates if the base rate falls.
Get a prequalifying offer
You should always try to receive a prequalifying offer. This will help you get an offer from a seller because nobody would entertain you without a prequalifying offer. You can receive this offer from several mortgage letters. This is called an Agreement in Principle. This will help you know how much money you are most likely to get approval for at what interest rates.
However, it is vital to bear in mind that these are estimated rates and amounts. Mortgage lenders in Ireland will be able to quote actual rates, amount and term only after perusing your credit score and income sources. If your credit score is stellar, you would certainly be able to qualify for lower interest rates, and higher interest rates if it is bad.
However, bear in mind that actual rates are generally higher than those quoted in the Agreement in Principle. You should carefully examine your repayment capacity when actual rates are offered. A mortgage lender will provide you with a cooling-off period for up to 14 days. You can turn down the offer if you know you will not be able to cut it.
Prepare your documentation
A mortgage application involves a lot of paperwork. In fact, when you have to take out large home improvement loans, you do not need to go through loads of paperwork, unlike mortgages. A mortgage lender would be keen to know about your repayment capacity, and therefore, you will have to provide them with documentation.
Make sure that you keep all your documents ready to speed up the application process. Contact your mortgage broker to know what documents you will need. In fact, a mortgage broker will help you introduce you to a lender whose criteria match your current financial circumstances and goals.
A broker has a large panel of mortgage lenders, so it becomes much easier to choose the best one. However, you will have to pay certain broker fees. If you do not want to pay brokerage fees, you should do research for the best mortgage lender.
Ask plenty of questions
At the time of applying for a mortgage, you should ask plenty of questions. It is not necessary that a mortgage provider will inform you of everything. Most of the things are mentioned in the loan agreement.
You should go through it and ask if you have any doubts or queries. Do not ignore your concerns. It is your duty to be aware of everything. If you do not understand anything and sign the agreement, you cannot avoid bearing the consequences of your own negligence.
To wrap up
First-time home buyers in Ireland might find it hard to get a mortgage approved. It seems quite overwhelming because of the intense paperwork and strict approval criteria. If you try to maintain a good credit score and strong income sources, your chances of getting a mortgage approved are quite high.
Choose a mortgage broker who would be able to introduce you to a mortgage lender whose criteria matches your requirements. They will ease the entire mortgage application process as they will walk you through it.
