From Deposits To Credit Score: What You Need To Know About Getting A Mortgage
In the current climate, finally owning a home can seem nigh on impossible. Victoria Stokes asks an expert everything you need to know about securing a mortgage.
You don’t need me to tell you that the housing situation in Ireland right now is grim. Headlines point to it every day and for those of us steadily squirreling away cash for a deposit and seeing a significant portion of our wages eaten up by rent that reality is all too real. With the odds seemingly stacked against us, finally owning a home can feel like an insurmountable challenge, peppered with confusing jargon, scary legal documents and potential disappointments.
If the thought of applying for a mortgage fills you with an unparalleled terror then you’re certainly not alone – according to statistics, one in six Irish people believe they’ll never get a foothold on the property ladder. We spoke to Ulster Bank’s Director of Strategy, Innovation and Customer Experience, Damien Daly to demystify the process and make things a little bit clearer.
How much do I really need to save for a deposit?
“As a first-time buyer, you will generally need at least 10 percent of the overall price of the property to put down as a deposit,” Damien confirms. “The bigger your deposit, the smaller your mortgage and the less interest you’ll pay in the long term.”
Daft’s Irish House Price Report indicates that in the past 12 months, house prices in Ireland have increased by an average of €15,000. The cheapest homes were found in Leitrim, with an average price of €137,000, while the most expensive were in South Co. Dublin for €609,000, meaning that, at 10 percent, average deposits can range anywhere from €13,000 to €60,000.
For most of us, those are huge amounts of money to attempt to scramble together. “Set a savings goal,” Damien advises. “Work out how much deposit you’ll need and set up a regular savings account.” Next the obvious bit: “Cut back where you can,” says Damien. “This can be difficult, but if there are any little luxuries you could cut back on to reach your goal quicker, you should consider doing so.” (There goes those regular avocado toast brunches, eh?) “Standing orders can make it easier so set up a standing order to transfer money to a savings account as soon as you’ve been paid.”
What about credit score? Is it really important and can I improve mine?
Whether it’s an ASOS habit or debt from years gone by, it can be daunting knowing that a bank is going to comb through your financial history. “To help us make decisions on when to give you credit, Ulster Bank uses a system called credit scoring when we assess your mortgage application,” Damien explains. “Credit scoring helps us predict how likely we are to get back the money we lend and is calculated from three sources: information you give us when you apply, information from the Irish Credit Bureau and your history with us.”
Fortunately, if you’ve haven’t got the best financial reputation, there are a number of ways you can improve your credit score, Damien reassures. “Always try to make at least the minimum payments on any loans or credit cards you have, and on time,” he recommends. “The easiest way to do this is by setting up a Direct Debit. You should also close any accounts that you no longer use as this can negatively affect your credit score and make you more vulnerable to fraud. Finally, if you need to apply for credit, or other products like mobile phones and insurance, it helps to space out the applications as making lots of them in a short space of time can also affect your score.”
What credentials do I need to be approved for a mortgage?
“First of all, you need to meet the minimum criteria for mortgages so you must be over 18 years of age, buying a house in the Republic of Ireland and resident in the Republic of Ireland. It’s important to remember also that security, building insurance and life cover are required when you take out a mortgage,” Damien explains. “Secondly, it’s important to have all the required documentation when applying for a mortgage. Your Mortgage Specialist will be able to provide you with a list – or it’s available on the Ulster Bank website.” As for why you might be turned down for a mortgage, Damien says, “It is unlikely that we will be able to lend to you if you have ever been declared bankrupt, have had court judgements against you, your property seized, defaulted on your mortgage, or had to organise a repayment plan with your creditors, but we would make sure to communicate this to you right away.”
I’ve found my dream home and I’m ready to make an offer, what next?
“First things first, have a look through the documentation that you will need to have available when applying for your mortgage. If your offer is accepted by the seller or estate agent, and you’ve agreed the amount that you will pay for the property, then you need to arrange your mortgage application through your chosen bank,” Damien explains. “At this stage, you’ll also need to find a solicitor or conveyancer to take care of the legal transfer of the property. Before signing the contract it is really important to have independent checks made on the property too. A valuation is designed to give you an idea of the property’s condition and how much it is worth.”
Once you’ve those bits sorted, then it’s time for even more important documents and forms! “With almost any mortgage you’ll always need to have buildings insurance to cover your new home,” Damien explains. “You’ll also need life cover, which depends on how much you’ve borrowed, for how long and what sort of mortgage you have. Your Mortgage Specialist will be able to provide you with more details.”
After that, your new home is just within grasp. “Providing there are no problems with the survey, the solicitors on both sides will draw up formal contracts for you and the seller to sign,” Damien concludes. “These are legally binding so make sure you’re happy to go ahead. On the day agreed by both parties we’ll release the mortgage funds to your solicitor who in turn will transfer them to the seller’s solicitor. At the point the funds are transferred, the property is yours. Then all that is left to do is move in and start enjoying your new home!”
Damien shares his top tips.
1.Once you have a figure together of how much you have to spend, you should start looking at available houses, either online or through estate agents. Search the houses on the market and get an idea of what you are looking for. How many bedrooms do you need? Do you want a garden? What about a garage or off-road parking? These are all important questions to consider and those needs are different for everyone.
2. When you see a new property that you like, call the estate agent and arrange to go and see the property, or attend an open viewing. There’s no harm in looking and the more you see, the better idea you will get of what you might be able to afford.
3. You should then compare mortgage rates and monthly repayments. You can use the Ulster Bank online calculator to help you understand how much you could be paying back per month and over what timeframe.
4. Once you choose your preferred mortgage, it can be useful to apply for an Agreement in Principle from the bank. This is an indication of how much you could borrow, based on the details that you give them. It’s not a full mortgage offer, but it shows sellers and agents that you’re a serious buyer.
5. Once you’ve found the perfect place it’s important to move fast. Make an offer through an estate agent but remember that the sale price is just what the seller hopes to get. You may be able to agree a lower price.
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