8 key factors when seeking a loan approval
GETTING approved for a mortgage is not easy. The level of information required is vast and the whole process is very time-consuming.
This means that it is a process that should only be undertaken by those people who are well organised, advises Ciaran Phelan, the chief executive of the Irish Brokers' Association.
"The level of information required is vast. Be prepared to put some time into the process," he says.
"And be as organised as you can possibly be - banks will look for documents and data, and they may ask you or your broker to resend this information, or if time lapses, to send updated bank account statements etc."
Mr Phelan's top tip is to open a mortgage file/folder that you can refer to as these requests roll in.
This may make the process easier for you, possibly less stressful and it may keep the time it takes to get the application submitted and hopefully approved to a minimum.
There are a myriad of considerations the bank will take into account when deciding whether or not a candidate will get approval.
Here he outlines what it takes to get loan approval, by setting out key factors that will determine if you are granted a mortgage.
1. Job security
A bank will look into what you do, where you work, and how long you've been in your current employment.
Generally, if you are in your current job under a year then the bank may ask some further questions of you and your employer to try to ascertain whether or not your job can be considered secure. Those that are self-employed will need to provide a longer track record of stable income.
It stands to reason the amount of money you earn every month will play a part in whether or not the bank has confidence that you will have the financial capacity to meet your monthly repayments.
Income is not always just salary - banks will look at regular bonuses and possibly money you are receiving from other sources on a regular basis.
3. Savings history
The importance of a savings history has grown in recent years as banks really look into the 'calibre' of borrower.
Banks, like consumers, have been taught a financial lesson as a result of the crash and they are now choosier when approving mortgage candidates. They want to know, in so far as is possible, that a person is sensible when it comes to money and one of the best ways of demonstrating this financial sensibility is by establishing a strong regular savings record.
4. Credit history
This has always had a bearing on mortgage approval but now more so than ever.
You can check your own credit rating with the Irish Credit Bureau (ICB) for a small fee. If you do have a red flag on your record this does not automatically mean you will be rejected - but it does mean the bank will ask more questions.
5. Outstanding debt
Obviously, if you have other financial commitments to creditors this will be taken into account. You need to be able to show a financial ability to repay all lenders on a monthly basis. Having an expensive overdraft and/or credit cards can negatively impact your chances.
6. The property
Once the bank researches the candidate, it will then want to look at the property involved to ensure it is really worth the mortgage being taken out on it. The bank will insist that you engage the expertise of a valuer to provide an official valuation of the property.
The amount you can put towards the loan-to-value of the house will play a big part.
8. Spending habits
The bank have been known to go through current account statements with a fine tooth comb to get a clearer picture of the spending habits of an applicant.
Online betting accounts, late night withdrawals from bars and nightclubs, and using credit cards to access cash are all red flags.