Irish mortgage expert gives top tips on how to buy your first home in 2022
As we leave 2021 behind and set goals for the New Year, some people lucky enough to save may start considering buying their own homes in 2022.
But the process of getting a mortgage for the first time can be a daunting task, so we spoke to Finance Solutions mortgage broker Eoin O’Connor aka The Mortgage Guy on Instagram to give him a step-by-step guide. on where to start.
“People think mortgages are scary and are afraid to approach people,” Eoin said.
“As a mortgage broker, I make it as easy as possible for clients to come to me. I cover everything in five simple points.
1. Proof of income
You need to show the bank that you have income to support the amount of the mortgage you are looking to take out.
“Whether it’s a full-time, part-time, contract job, whether you’re self-employed, the bank needs you to have an income.
“Income will determine how much you qualify for a mortgage. The general rule is 3.5 times your salary. There are exceptions to this rule, but… you must have a strong case to search more than 3.5 times.
BEST EOIN TIP: To prove your income, you will need these documents …
The payslips for the last three months, the detailed job summary and a salary certificate completed by your employer – which confirms your start date, your profession, your base salary and any variable income (bonus, etc.)
For the self-employed, you will need to provide your audited accounts for the past three years and confirmation from your accountant that your tax affairs are up to date / tax clearance certificate.
2. You must have a minimum deposit of 10%
“As the first buyer, you have to pay a 10% deposit. It can come from savings. This can come from the purchase assistance program if you are purchasing new construction. You can get up to 30,000 from there, depending on how much income tax you have paid over the past few years.
“But it can also come from a gift from a family member who is willing to help. “Mommy and Daddy’s Bank” is a very popular topic right now, but more and more parents are willing to help their children by giving them money and the banks are all for it. with that if everything else backs up.
EXPLAIN : If you are a first-time buyer to buy a home that costs $ 300,000, you need a down payment of $ 30,000. This is a 20% down payment for a second buyer and a 30% down payment on an investment property.
3. Proof that you can afford to pay the mortgage
“If your payment is $ 1,000 per month, you need to show that you can afford it by saving each month or renting each month. You have to demonstrate this for six months.
“Some lenders do what’s called a ‘stress test’ to demonstrate affordability. This means they add 2% to the rate, just for appraisal, to see if interest rates have gone up over the life of the mortgage, allowing you to demonstrate that you can make mortgage payments.
“Ideally, if you could save a couple hundred pounds on top of that mortgage payment, that would cover all lenders when you apply for a mortgage. “
BEST EOIN TIP: It’s all about consistency. If you are paying rent in cash, be sure to take the exact monthly payment on the same date each month so that it is clearly identified with the bank. And get a copy of the rental agreement.
4. Your bank accounts must be in good standing.
“You shouldn’t be under financial pressure before taking out a home loan of € 300,000 to € 400,000.
“The financial pressure would be: missing direct debits, your account overdrawn all the time, resulting in referral fees.
“Lenders will typically ask for recent six-month statements on all of your accounts, including Revolut. People think they’re not looking at Revolut, they are.
“Keep a stamp on your $ 100 checking account, no exact number, but if a phone bill comes out early, you leave enough so that your account doesn’t go overdrawn.” “
BEST EOIN TIP: Continue to bet on the bank account. Go down to the store!
5. Clean up your credit history
“That means no missed payments on loans, credit cards, overdrafts or previous mortgages (if you’re a second buyer) in the past.
“This could be a huge factor when it comes to approving, denying or deferring your mortgage application, even if you meet the other four points. “
BEST EOIN TIP: Whether you think your credit history is healthy or not, order your credit report on the Credit Center website. It’s free.
Additional charges to consider include:
Legal fees of up to € 2,000 – € 3,000 on average
Stamp duty – 1% of the property’s value
A recent report from Daft.ie showed house prices rose 7.7% in Ireland this year, with the average house price rising to € 290,998.
While the prospect of applying for a mortgage amid the current housing crisis may seem an unfeasible prospect, Eoin has offered some advice to those frustrated with the market as it is today.
He said: “Even though house prices have gone up this year… focus on controlling the controllable things that get mortgage approval.
“If you find the right property and think the monthly payments are affordable, then proceed with the purchase instead of worrying about all the other things we can’t control like house prices, house issues, supply, inflation, etc.
“If you can’t find the right property for you, your approval can always be extended with up-to-date documents and tax returns until you find the right property for you.”