Our Mortgage Journey - Taking The First Step

So myself and Dean are finally in a position to (hopefully!) buy our own house! We have been saving for two years now and are at the point where we have a decent deposit together. We made a (free) appointment with a mortgage broker just to get the ball rolling, and here's how we got on....

Up until the meeting, I was completely clueless as how to even go about getting a mortgage. They should really teach you this in school! So I want to share my experience from the very start of the process, right to the end, so you know what to expect and what to prepare for. 

To keep a timeline on things, this all started on January 21st 2017 with a meeting with a mortgage broker. Killian, our broker had asked us to bring the following documents:

P60 - This is the form you get from your employer at the end of the year to show how much you earned that year. I only brought in my P60 for 2016 but you may need to show previous years as well.

The last three months payslips - Just to show proof of your salary.

A salary cert - So this is a letter (well more so a form) signed by your employer confirming your salary, contract type, any bonuses, pay scale and pension details.

Current account bank statement - So just your normal bank account statement going back six months. This is to show proof of regular income and that you do actually get paid what your payslip says. So if you're getting paid cash make sure you put it in your account then withdraw from there. This also shows that you regularly pay rent, phone bills etc.

Loan Statements - Statements from any loans you have, credit union, credit card etc. If possible have these cleared, as the repayments on these will reduce your mortgage repayment capability. 

Savings statements - So this is the big one, a statement to show that you save a certain amount regularly and how much you have saved so far. Currently you need to have saved a deposit of 10% of the house value, but don't forget you'll also need a good bit of money to fill your new house with furniture, appliances and pretty things 😁

With all this on the table, Killian went through everything and asked us a few questions. These included if we pay rent (I live at home and pay a small amount to my parents), if we had previously rented (in our case we had rented an apartment a few years ago, so we gave details of that) and how much we pay back on our loans - basically just seeing what we regularly pay for and what we owe.

Within a few minutes Killian had a figure for us, an approximate figure of what a bank would be willing to loan us. Currently the general rule is that a bank will loan you 3.5 times your gross income. And to be honest this wouldn't get myself and Dean a decent house, in Dublin anyway. I was so relieved to hear that this rule isn't as strict as I thought it was. Some banks would be willing to go slightly above that. But let's park that for now.

So a few things that came up in our application:

1) We had a bit of spending on our savings account. I know, I know - what was I thinking?! So even though we saved X amount a month, the average (over six months) of that savings was reduced by the spending. And it's the average figure that is used to calculate our repayments capabilities.

2) We had received a gift of money in the last six months, which is fine, but this amount is also removed from the equation when calculating the average savings over the last six months. 

3) Our average monthly savings weren't enough. This isn't all bad though. Our savings account showed we didn't put away enough money for the repayments (if we were to get the absolute maximum loan approval) but our salary showed we did make enough, so we could easily make up the difference. One again, stating the obvious here - it would be best to save as much as possible, easier said than done though!

So I'm gonna leave it at that for now. I think it's enough information to digest for one day! At the minute we are waiting to see what the banks come bank with, as our meeting did end in a mortgage application. From what I gather, the broker applies to all the banks and comes back to us with the best option. We just have to send in a few more documents and we should have a figure in a few weeks. You don't have to go to a broker ready with your deposit, I'd definitely recommend going early so they can advise you on how and what to save. And don't forget - they get paid by the bank, not by you! 

I'll keep you updated, and there'll be plenty more blog posts to come on this topic!

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