How to secure approval for a first mortgage
One would have imagined that in a market where house prices have fallen by 50pc on average, that those who want to buy for the first time would be in a very enviable position.
However, the reality is very different. Currently, there are really only four lenders with funds to lend to first-time buyers: AIB, Bank of Ireland, ICS Building Society and KBC Homeloans.
Bank of Scotland (Ireland), Halifax, Irish Nationwide, Leeds Building Society and ACC have exited the market. EBS is amalgamating with AIB; National Irish Bank has no real appetite to lend; and the current excessive interest rate offering from ptsb and Ulster Bank confirms their position.
Key requirements for first- time buyers getting a mortgage are:
You must be permanently employed in what is described as "sustainable employment". Banks will only lend if they believe your employer will be around in 12 months' time or more.
I had a farcical situation recently where a bank declined a loan for an employee of another bank.
Self-employed individuals must be trading for a minimum of two years.
If you are in contract employment or temporary employment other than in the medical profession, it is very difficult to secure a mortgage.
'Save, save, save'. You must have savings built up over a 12-month period to demonstrate your ability to make the sacrifice and show the discipline of saving monthly while you have no mortgage.
No longer is it sufficient to get a gift of €20,000/€30,000 from your parents.
AIB simply will not lend without savings.
In exceptional circumstancesBank of Ireland and KBC will consider a gift coupled with savings.
If you are renting, banks will consider rents as similar to saving.
You must have a clean credit rating record for loan repayment history with the Irish Credit Bureau. You must show regular prompt repayments on any term loan with a bank or credit union.
Be careful with credit cards as merely paying the minimum balance will not be acceptable.
Income multiples have been replaced by loans being calculated based on a minimum net disposable income being available after the mortgage repayment has been deducted at a stressed level of 5pc, rather than the prevailing variable interest rate.
Minimum basic salaries are required. Single applicant: €25,000; joint applicant: €35,000
Seek professional advice when preparing your mortgage application and be prepared to wait for the decision. The average timeframe is seven to 10 working days for a decision, with up to 15 working days not being uncommon.
Michael Dowling is a director of Abacus Finance