First Time Buyers Guide – Ireland

A guide to help first time buyer’s prepare for a successful mortgage application

Applying for your first mortgage can be a daunting process, though it doesn’t need to be. Our team of experts at Irish Mortgage Corporation have curated a guide for first time buyers that will help you to make the right choices when the time comes to climb onto the property ladder.

This guide will help you to successfully prepare for your first mortgage application.  

Status Demonstrate Your Savings

When seeking to obtain a mortgage for the first time, it is important to demonstrate your ability to save money and/or pay rent on a monthly basis. Set up a savings account to separate your day-to-day spending money from the money you are saving. At Irish Mortgage Corporation, we recommend setting up bi-monthly or monthly automated payments into a designated savings account. This will demonstrate your ability to put money aside every month, and to repay a mortgage when the time comes.

It can also be beneficial to track your spending via a budgeting system in the months before applying.

Identify how much money you need to spend on rent, groceries and utilities each month, and following this, how much money is leftover to put into a savings account. This way, you can identify where your money is going, and where there is room to cut back and save even more. The more savings the better when you are a first time home buyer. In addition to regular saving, our team of mortgage experts recommend paying monthly rent through your bank account, for a minimum 6-month period prior to applying for your first mortgage. Paying your monthly rent on time, and in full, over a long period of time, effectively demonstrates your ability to repay to any potential mortgage lender.

Your Employment Status When Applying For A Mortgage

Ensuring you are in a full time employment position is crucial when applying for your first mortgage. In order to apply for a mortgage, every applicant is required to prove they have been in a full time permanent employment position for a minimum of one year. Any mortgage lender will be required to see evidence of this in the form of documents provided. While it is not the case for all mortgage lenders, in some instances, contract employment may be considered too. Due to a vital mortgage requirement being full time employment for at least 12 months, we advise against changing employers during the process of mortgage application if possible. Doing so will effectively prove the applicant’s ability to remain in long-term and secure employment throughout the course of their mortgage repayments. The majority of mortgage repayments for first time buyers will span between 25 and 35 years, depending on a number of variables, such as mortgage deposit, buyer’s salary and house price. There can be unique situations in which a potential buyer has not been in full time employment for a full year, though these are evaluated on a case by case basis, and are less common.

Account Management & Spending Habits

In the 18 months before applying for a mortgage, it is important to be very aware of your spending habits. As mentioned above, our experts recommend creating a monthly budget, incorporating regular savings and strictly adhering to this. Cut out unnecessary expenses and check your direct debit list to ensure everything you are paying for is useful and important to you. A comprehensive budget, outlining the ins and outs of money entering and exiting your bank account, will eliminate the possibility of overspending each month. Be sure you are effectively managing your accounts, with focus on your savings account.

If you currently have outstanding existing borrowings, ensure they are paid in full and on time.

This way, you will avoid late repayment fees, which can negatively impact your mortgage application, particularly as a first time buyer. Every month, a first time buyer should ideally be paying rent and/or saving the equivalent of a mortgage repayment. In this way, your ability to manage your money, accounts and spending is clear to any mortgage lender chosen to approach. Beginning to make tactical changes to your spending habits is the first step to getting onto the home buyer’s ladder.

Securing Pre-Mortgage Approval

Prior to searching for a potential property to purchase, our team of mortgage experts at Irish Mortgage Corporation recommend securing pre-mortgage approval also known as Approval in Principle (AIP). Securing an AIP before finding a property will give you a good understanding of the price point you can afford. Not only does it provide you, the buyer, with knowledge of your purchase value, it also provides the mortgage lender, and estate agent with knowledge of the amount of money you are in a financial position to spend on your new home. This information also informs the seller of your ability to pay once you have made an offer on their property. There are a variety of tools available online that can assist you in calculating your maximum mortgage approval, such as the our own mortgage calculator on our homepage. Tools such as this one were designed to give you an idea of the amount of money you can borrow, along with the potential monthly repayments based on your current earnings and current expenditure. It is important to note that these mortgage calculators provide only an estimation, and we advise you to speak to our expert advisors on this in further detail to secure an accurate pre-mortgage approval amount. AIP’s typically last 6 months.

Online Property Searches & Being Proactive

Once your mortgage approval has been secured, we recommend making contact with an estate agent soon after. It is important to be proactive and link in with them directly in order to take advantage of your recent approval and the existing housing market. While online property searches can be informative and indicative of pricing and the market, at Irish Mortgage Corporation we advise against relying solely on online searches. Estate agents have a lot to offer home buyers, particularly to a first time buyer. Firstly, their pricing expertise will guide your expectations and help you to find the perfect first home within your price range.

While some online research will enable you to compare house prices yourself, agents have years of knowledge and expertise to identify when a house is either overpriced or underpriced.

An agent will ensure that no time is wasted viewing homes that are not suited to you and your needs. In addition to this, an estate agent will often identify issues with a home that you may not see. Such issues may include the potential for noise pollution, dampness, foundation flaws, poor ventilation and drainage. With many other benefits such as looking after paperwork, negotiation skills, area knowledge and thorough record keeping, estate agents can make your experience of buying a new home a smooth one. Following mortgage approval, taking active steps toward the purchase of your new home is important, and our experts recommend starting here.

Doing A Credit Check

Prior to approving a first time buyer’s mortgage value, a mortgage lender will analyse the applicant’s ability to repay. Along with taking employment status, salary and monthly expenditure into consideration, this also involves looking into previous loans and identifying whether there were ever issues with repaying on time, or in full. This is where a person’s credit rating comes from. If you have had  experience taking out loans in the past, and successfully paid them back on time and in full, you will have a positive credit rating. If not, and you have struggled to repay a loan on time and in full, your credit rating may be poor. This highlights to a mortgage lender that you have had difficulty repaying loans in the past. This does not mean you are automatically ruled out for mortgage approval, but it may affect the value of the mortgage you are approved for. We advise doing a credit check prior to applying for mortgage approval. If you are applying for a joint mortgage with a partner or spouse, be sure to check both parties. This can be done by either visiting the ICB website, following the instructions and paying a small fee to receive your credit rating report (€6.35 per report). Within a few days you will receive your ICB report outlining your credit rating or; see www.centralcreditregister.ie for the newer credit report now available. This one is also free. Any potential mortgage lender will also do this, so it can be very helpful to be aware of what they will see. For example, if any details are incorrect, they can be corrected before any mortgage application is submitted.

Additional Cost Considerations

It is important to consider all costs when purchasing a property for the first time. Upon initial consideration, it is often only the value of the down payment and deposit that are factored in and set aside by first time buyers. In addition to these costs, and depending on the value of your mortgage approval, it is vital to factor in an additional 4-5% of the price paid for the property to go towards a multitude of other outgoing costs. Such additional costs include the cost of stamp duty on the purchase of your new home, paying for legal fees, the cost of surveyor or valuation fees, and a variety of other miscellaneous costs.

In Ireland, all house purchases are liable for stamp duty and it is required to be paid within 30 days of signing the new property purchase document.

It is a property buying tax charged by the government of Ireland. When it comes to legal fees, they can vary from solicitor to solicitor. Some charge a flat fee, and others base their fee on a percentage of the house being purchased, which is often 1-2% of the property value. We recommend getting a surveyor in to view the property you are interested in buying before you finalise the home purchase. They will make you aware of any property defects, allowing you to make a more informed final decision. Setting money aside to cover any additional costs that may arise in the process of buying a new home is important. Talk to Irish Mortgage Corporation about our professional partners packages which include details of our recommended solicitors and surveyors.

Seek Impartial Mortgage Advice

It is important to seek advice from a mortgage broker who ideally has access to all mortgage lenders, and avail of their range of services when applying for your first mortgage. Irish Mortgage Corporation, who have access to ALL 8 mortgage lenders operating in Ireland, will provide you with useful advice during the first time buying process. They will provide you with information such as what mortgage lenders are out there, the variety of mortgage repayment offers available, and which one is best suited to you and your purchasing needs. In addition, they will also provide you with information on the most suitable house insurance & mortgage protection/life cover options and other relevant guidance and advice.

All recommendations provided by a mortgage broker are in the buyer’s best interest and are curated to suit the unique needs of each person.

If you choose to deal directly with a mortgage lender, you will be limited to their offering, and it may not be the most suitable for you. In addition, mortgage brokers work closely with a wide variety of mortgage lenders, and as a result, often have knowledge of deals and exclusive rates. They will negotiate on your behalf to get the lowest interest rate possible, which will save you money on your future property repayments.

The process of applying for your first mortgage can be an overwhelming one. Though with our first time buyer’s guide, we hope the process can now be made easier for you as you embark on this new chapter of your life!

Are you ready to apply for your first mortgage? Get in touch with our experts at Irish Mortgage Corporation today by calling 1850 444 474 or 01 669 1000 or by emailing info@irishmortgage.ie . See www.irishmortgage.com for the APPLY ONLINE facility that is now available.

For more tips on how we can help you get your first home, check out our First Time Buyers section.