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How To Qualify For A First-Time Buyer’s Mortgage
Obtaining a first-time buyer’s mortgage is one of life’s biggest milestones – one that comes with a mix of excitement and apprehension. To avoid the latter taking over and limit unnecessary anxiety, it’s vital to develop a clear understanding of the process so that you can put your best foot forward.
In this article, we aim to help those seeking first-time buyer status by providing clear and practical information on how to obtain a mortgage and purchase your very first home.
What is a first-time buyer?
In Ireland, you are classified as a first-time buyer if you have not previously bought or built a property to live in, and if you do not own or have an interest in any property in this country or abroad.
While this is the general definition, exceptions do exist. Individuals who have gone through a divorce, separation or insolvency, may be considered “fresh-start applicants”, and will be treated similarly to first-time buyers.
The key steps in qualifying for a first-time buyer’s mortgage
Before embarking on the mortgage application process, it’s vital to ensure you have your ducks in a row across several key areas. This involves ticking off a few very important boxes.
Assess your financial situation
You may have been saving for years in preparation for buying your first home, but will your nest egg be enough to get you a firm footing on that property ladder? The only way to answer this question is to assess your financial readiness under the following categories:
Meet the minimum deposit requirements.
First-time buyers are generally required to have a deposit of at least 10% of the property’s purchase price.
Maintain stable employment with a regular income
Financial institutions will not be prepared to lend to you if you cannot prove stable employment and a regular income that is consistent with mortgage repayments. Most lenders stipulate that employed applicants should have held their position for at least 12 months, and they will have to provide sufficient payslips to verify their suitability from a financial point of view. Self-employed applicants may be required to show proof of income that spans up to two years.
Calculate your loan-to-income (LTI) ratio
To define your budget cap for your dream home, you must first determine your loan-to-income ratio. As a first-time buyer in Ireland, you will typically be in a position to borrow up to four times your gross annual income. In the case of joint buyers, the LTI ratio will be calculated based on the combined income. A first-time buyer couple, for example, with a combined income of €100,000 can borrow up to a maximum of €400,000.
Demonstrate a healthy financial past
A positive financial past and healthy credit rating will be vital strings to your bow when applying for a mortgage as a first-time buyer. To establish both of these, lenders will assess the following:
Credit history
To achieve and maintain a positive credit history, it’s important to ensure payments on existing debts are consistently made on time.
Savings history
In the years and months leading up to a mortgage application, it’s vital to have a steady record of consistent savings to show your ability to budget accordingly and set aside funds that will be similar in value to future mortgage repayments.
Prepare the necessary documentation
To qualify for a first-time buyer’s mortgage, you will need to compile a list of required documentation. Gathering this at the earliest stage is a surefire way to streamline the application process. These documents include:
- A valid form of identification, such as a valid passport or driver’s licence
- A recent bank statement or utility bill that showcases proof of address
- At least six months of personal and business (if applicable) bank statements
- Recent payslips, an employment letter and statements from Revenue that verify proof of income
- Self-employed individuals will be required to provide additional documentation under this category, such as 2-3 years’ worth of Revenue Notices of Assessments and a Tax Clearance Certificate.
Budget for the hidden costs of a first-time buyer’s mortgage
Beyond the deposit and mortgage repayments, first-time buyers need to be prepared for the hidden costs associated with a mortgage. Some of the most costly of these excess fees are:
- Stamp duty, which is typically 1% of the property’s value up to €1 million
- Costs associated with structural surveys and property valuation
- Legal fees, which are paid to a solicitor for conducting conveyancing services.
Oftentimes, first-time buyers are unaware of these excess costs until the last minute, highlighting the importance of doing your research before putting pen to paper on that mortgage application.
Engage with a mortgage broker for expert advice
Working with an experienced mortgage broker can be invaluable for first-time buyers, who are navigating very unfamiliar terrain as they pursue their first mortgage. These experts can offer personalised guidance tailored to your unique circumstances, ensuring you secure the best possible terms.
Financial advisors are also best placed to advise you on certain incentives which may make your dream home more attainable, such as the Help to Buy Scheme and the First Home Scheme. These initiatives are designed to make the home-buying process more affordable for first-time buyers.
Obtain approval in principle
Securing approval in principle (AIP) from a lender provides clarity on how much you can borrow. It is an initial agreement from a lender outlining the amount they are prepared to offer you based on a preliminary review of your financial circumstances.
While not a formal mortgage offer, it provides a clear estimate of your borrowing capacity, helping you refine your property search within a practical price range.
Maintain financial stability at every stage of the process
While keeping a firm eye on your financial health in the years and months ahead of pursuing a mortgage is vital, it is equally as important to avoid significant financial changes during the mortgage application process. This includes taking on any new loans or changing jobs, both of which can significantly hinder your chances of qualifying for a mortgage.
Qualify for a first-time buyer’s mortgage with the help of Symmetry Financial Management
Embarking on the journey to homeownership requires careful planning and a clear understanding of the mortgage qualification process. Seeking professional guidance can speed up and streamline the entire process, enabling you to secure your first home with confidence.
At Symmetry Financial Management, our team of experienced mortgage and financial advisors is committed to supporting you every step of the way, helping you secure the best possible mortgage terms tailored to your unique needs. We simplify your options, presenting them clearly and concisely, so you can make confident, well-informed decisions.
Just like all our clients, you can trust us to provide expert first-time buyer mortgage advice, ensuring you feel content in your choices – without any uncertainty.
Contact us today for help with your first-time buyer’s mortgage
Get in touch with our team today to find out how we can help you qualify for a mortgage and obtain your very own home!
If you’d like a free, no-obligation consultation for your mortgage, pension or financial needs, get in touch here, call us on 01 6831673 or email us directly on info@symmetryfinancial.ie.
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