Buying a new home is a very emotional time for people. It is such a huge event, especially for first time buyers who are going to get their own place for the first time. The problems arise when you try to get a mortgage. It’s not easy. The banks hold all the cards and they know it. They will make what seems to be the most unreasonable requests, knowing that you will bend over backwards to get it for them. To make this process a bit easier for you, I will run through some of the biggest mistakes I see in mortgage applications.
This is the biggest mistake that people make when making a mortgage application. Not only does a bank want to see that you can afford to make the mortgage repayments, they want to see that you can make the repayments if the interest rates go up by 2%. The methods of proof are:
I have lost count of the amount of times that people have told me that they are saving €2,000 a month. It is only when they give me their bank records that I see there are multiple withdrawals from their savings account every month. Banks hate this and in some cases will reject the application as there are too many withdrawals. In the 6 months prior to an application, there should only be money going into the account, nothing going out (unless it is deposit money for the house). Do not use your current account to save money, it is too difficult to assess how much you are saving.
If you finish paying off a loan, make sure you save that amount instead if you want it to be accepted as proof of ability to repay.
We all create systems that make perfect sense to us but is impossible to explain to someone else. Now, imagine sending in hundreds of pages of bank statements for multiple bank accounts along with a note explaining how it all works. Keep your bank account system simple so that you can easily explain it to someone and it makes sense! Once you get your mortgage you can go back to your own system again!!
A lot of people miss credit card or loan payments when they are younger not realising the ramifications that it will have years down the road when they are applying for a mortgage. The very first thing that a lender looks at when assessing a case is the applicant’s credit rating. If you have a bad credit rating, they will reject the application.
Banks have begun to show a little bit of leeway in this area. If you missed one payment and have a very good reason i.e. just emigrated, they may let one payment go. Pepper mortgages, will accept less than perfect records but they do charge a higher interest rate. But if your ICB rating shows a lot of missed payments, that tells a bank that they may have trouble getting their money back from you.
Banks want to see bank statements for a specific period of time, usually 6 months. Give them what they ask for. Bank statements for 5 months and 3 weeks will not be accepted and will only delay the process.
Getting a mortgage is a really difficult process. You need to plan for it months in advance to get your accounts in order so you can make the best case to the bank and have your application processed as quickly as possible.
If you have any questions regarding making a mortgage application, you can contact me directly at steven@bluewaterfp.ie