The festive shopping season is in full swing but a Cork mortgage adviser is warning prospective house hunters that their activity now could influence their chances of getting the best mortgage months into 2019. If becoming a house owner is one of your New Year’s resolutions, Joey Sheahan, head of credit at MyMortgages.ie, says this is the time to get your finances in order. He expects a lot of activity in January.
“This is an important time for first-time mortgage applicants in advance of lending exemptions opening again in 2019,” he said.
“The latest mortgage figures reveal that mortgages are increasing in terms of volume and value and that first-time buyers remain the single largest segment by volume.
“As it stands, first-time buyers have two options — comply with the general lending regulations or aim to be included as part of the bank exemptions allowed.”
The exemptions allow a limit of 90% loan-to-value to apply on the first €220,000 of the property value, rather than being bound by a loan-to income restriction of 3.5 times gross annual income.
“While not all banks are entirely closed to exemptions, most have reached their exemption quota,” said Mr Sheahan. “However, applicants will not have long to wait until exemptions open again in January 2019.” There will be a lot of competition for the exemptions so mortgage seekers should do what they can to make their accounts approval-friendly.
“Applying for a mortgage is a big undertaking, and one which needs to start months before the application forms are even looked at,” said Mr Sheahan. “You might only get one bite at the cherry with a lender so it’s crucial you put your best foot forward.
“Before they will give any consideration to a mortgage application, a bank will first look at the applicant’s credit history and their recent banking history. Ultimately, what they are looking for is a capacity to repay any loan tendered and a propensity to do so, as evidenced by past behaviour.
“There are several ‘red flags’ that will put a lender off in part, or perhaps in full, and applicants must ensure that these are not raised on their application.”
Behaviours he suggests lenders will see as red flags include evidence of online gambling on your bank/credit card statements, erratic spending patterns, and, obviously, a poor credit rating.
What lenders want to see above all is stability of income and outgoings. Their ideal mortgage applicant is one whose bank statement clearly shows that they will be able to meet their repayments.
If you are saving, make it a regular, visible amount moving from your current account, and staying in savings. Regular dipping back into those funds to cover day-to-day spending, or putting money away in random amounts, look far less stable to your bank. Mr Sheahan advises mortgage seekers to make sure rent is paid through their bank account.
Your accounts should show an individual (or couple/family) clearly living within their means. Even if you have an approved overdraft facility, it is better not to use it on a regular basis and going overdrawn without approval is a definite no-no.
Cash advances on a credit card are an expensive way to access funds because you start paying interest immediately. Avoid, even if on holidays, because it looks like a clear sign of overspending. Clear your card balance in full each month. We should aim to do this anyway, as credit cards are high-interest debt, but it also shows you are in clear control of your spending.
Don’t be put off applying because you are self-employed or under contract. Yes, being in permanent employment is a plus. But applicants will be reviewed on a case by case basis. If you are self-employed ensure that you have all your accounts fully up to date and all relevant returns filed with Revenue.
Applying for a mortgage can seem daunting but 10,873 new mortgages to the value of €2,369m were drawn down by borrowers in Ireland during the third quarter of 2018 alone.
Despite the negative news coverage, many people are getting mortgages and finding homes — in 2019, it could be you.
Source: Irish Examiner https://www.irishexaminer.com/breakingnews/lifestyle/features/making-cents-prepare-financially-now-for-mortgage-hunting-in-2019-891196.html