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Essential reading if you’re hoping to get top marks for your financial wellbeing when applying for a mortgage...
When deciding whether or not to give you a mortgage, the bank is essentially examining whether you are someone they feel comfortable doing business with. They just want to check that you are on top of your finances and can afford to pay back your mortgage.
Would you hand over hundreds of thousands of Euro to someone without finding out about them first? Nope, didn’t think so.
So if you’re hoping for top marks when applying for your mortgage, then check out our handy tips below:
1. Get the maths right
How much do you earn? What’s your employment history? How much rent do you pay? How much are you saving? Will you still be able to sustain your lifestyle once you drawdown your mortgage? These are all important things the bank needs to look at when considering you for a mortgage.
Typically you can borrow three and a half times your salary so this will give you a good idea of your budget.
2. No cheating
You may have thought that your parents could deposit a short-term lump sum for a visit to the bank, however it’s not that easy. If you’re serious about getting a mortgage, you’ll have to show your P60 to prove that you earn what you say you do. If you received any bonuses that boosted your earnings, the bank will want to see proof of this too.
If you’re self-employed you’ll have to take the Honours Level paper – that is, provide additional documentation. They’ll want to see your certified/audited accounts for the past two years so make sure that you’ve engaged an accountant and that your tax affairs are in order before you even think of approaching a lender.
3. Show you’re an A-student
Your bank will also want proof of your ability to pay back the mortgage. You may have moved back home to save, but proof that you are able to repay your new mortgage repayment is a must. This proven ability to repay could be in the form of rent payments or regular savings for example.
It would be best to do your sums and figure it all out. Most banks provide an online mortgage calculator which can give you an initial idea of what your repayments would be and you are better informed before you start your mortgage application.
A record of savings is a major plus. It’s a good idea to open a savings account so you can clearly show a regular amount being saved each month. Not only is this useful for saving your deposit, it shows the bank that you can pay back your mortgage each month.
They don’t want you borrowing to the very limit of your ability and surviving on beans and toast, they want to see that you can afford to still have a life while paying off your mortgage. Which, let’s face it, is what you want too.
4. Be punctual
Make sure you always have enough money in your current account to cover all payments that are going out of it. It’s a good idea to keep a baseline that you never dip into, so your account never goes below zero.
Avoid any late or missed credit card payments. Did you know you can set up a direct debit from your account to pay your credit card bill so you never miss a payment?
5. Do your homework
The bank will want to see your last three to six months' bank statements, so why not think about it like you would think about the Leaving Cert? You have to make it easy for the examiner!
Try to label all your outgoings clearly, whether it’s rent, savings, paying back a car loan repayment, it’s simple to set up your Direct Debits with clear titles and notes so that you can easily identify what is going in and out of the account.
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