Making Cents: Get your house in order before seeking a mortgage

Making Cents: Get your house in order before seeking a mortgage

Consumer advice with Gráinne McGuinness

This month we are looking at ways to fulfil financial New Year’s resolutions. Buying a home of one’s own is a milestone in life but there are plenty of hurdles to overcome first.

I asked Joey Sheahan, head of credit at MyMortgages.ie and author of The Mortgage Coach, what advice he would offer someone hoping to buy their first home in 2020?

“Prepare prepare prepare!” he said. “If you are prepared and you take advice from an expert then chances are you will sail through the process.

“A mortgage is the biggest financial undertaking most people will ever take in their lives — this might sound daunting but it really doesn’t have to be — because thousands of people throughout the country are mortgage approved every month.”

Mr Sheahan suggests people prioritise sorting out their finances ahead of house hunting.

“I would advise you to get your finances in order first, then look for your new home,” he said.

If you look for a property before you have mortgage approval in principle, there’s a good chance the property could well be sold by the time you are ready to proceed with the purchase — which would, understandably, be very disappointing.

“What’s more, many estate agents/ auctioneers will not accept a bid unless you can show them a copy of your ‘approval in principle’.

"This is a document that states your approval of a mortgage for up to a certain amount based on the details you have given in your application. A mortgage approval in principle will usually be valid for six months.”

Many have concerns about buying their home ‘at the right time’, is there an argument for waiting to buy?

“Rents are high now across the country, so if the alternative is renting, I would say now is the time to buy, as in most cases the monthly mortgage payment is less than the market rent for similar properties,” he said.

“The market is also competitive at the moment — banks want the business.

“There’s no way of knowing what way house prices will go — but recent reports suggest they may be flatlining, which is encouraging as it offers more stability to the market.”

So what should people do to make their finances mortgage-ready?

“Do your homework, talk to a mortgage broker and do a trial run now.

“Even if you feel your bank statements are not in order etc, it is as well to show a mortgage broker you’re documents, warts and all, so that they can then advise you on what to do to present yourself in the best possible light.

We would advise anyone who thinks they might be in a position to take their first steps onto the property ladder to begin the prep work at least three, but ideally six, months out.

People should avoid “red flags” that put a lender off.

These include unauthorised overdrafts, online gambling referred to on your bank/credit card statements, cash advances on credit cards, even on holidays, non-documentation of regular payments such as rent, an irregular savings pattern, erratic spending patterns, and a poor credit rating.

Steps applicants should take to boost their chances:

  • Rent — ensure this is paid through your bank account;
  • Overdrafts — even if you have an approved overdraft facility, it is better for the balance to go into credit at least monthly;
  • Credit cards — ensure balances are cleared each month;
  • Loans — ensure all monthly repayments are fully up to date;
  • Savings — transfer your savings into one account and save a regular amount each month. Do not make any withdrawals from this dedicated savings account;
  • Deposit — you do not need to have all of your deposit before you apply. Once you have confirmation that a gift is available, that will suffice for approval in principle;
  • Employment — being in permanent employment is often a plus. But applicants will be reviewed on a case by case basis. If you are self-employed then you must ensure all your accounts are fully up to date and all relevant returns filed with Revenue.

DEAL OF THE WEEK

Virgin Mobile is currently offering everyone the chance to try out their Mobile Unlimited plan.

Existing Virgin Media Broadband or TV customers can try the plan for four months for free. If you’re not a Virgin Media Broadband or TV customer, you can try the Virgin Mobile Unlimited plan for two months free.

After the free period expires customers will play €25 per month for the plan, which includes unlimited 4G data, calls and texts. The plan operates on a 30-day contract, so customers are free to cancel at anytime.

If you are willing to commit to a 24-month contract, Virgin Media also have a number of smartphone offers.

Customers can get the Apple iPhone Xs 64GB plus the Virgin Mobile Unlimited Plan from €149 upfront and €40 a month for the first four months and €65 thereafter.

The Samsung S Series range plus the same plan, is available from free upfront and €30 a month for four months and €55 thereafter.

More on this topic

Ireland's tax system reduces income inequality - ESRIIreland's tax system reduces income inequality - ESRI

Around one in 10 households struggling to pay monthly billsAround one in 10 households struggling to pay monthly bills

Take cover: How to protect your incomeTake cover: How to protect your income

Making Cents: Dear diary - the trick to keeping track of spendingMaking Cents: Dear diary - the trick to keeping track of spending

More in this Section

The Menu: Upcoming food highlightsThe Menu: Upcoming food highlights

Storm in a teacup: Top 8 loose-leaf teasStorm in a teacup: Top 8 loose-leaf teas

Isabel Allende: It's never too late to fall in loveIsabel Allende: It's never too late to fall in love

Michelle Moroney highlights the need to take stock of our livesMichelle Moroney highlights the need to take stock of our lives


Latest Showbiz

Fans said they are ‘gutted and upset’ the star has cancelled the first of 15 shows at London Palladium.Madonna cancels first London show of Madame X tour

Fincham told his fans on Saturday that his new baby ‘was a blessing’ he chose not to share on social media before she was born.Love Island star Dani Dyer reacts to ex Jack Fincham’s baby bombshell

The former Love Island champion had kept the news he was going to be a father a secret.Love Island star Jack Fincham makes shock baby announcement

The band embarked on several world tours during their time together before going on their indefinite hiatus in early 2016.Louis Tomlinson says he was not ready for long One Direction hiatus

More From The Irish Examiner