If you’re a first-time buyer about to apply for a mortgage, you’re probably wondering if your application will be approved.
Will you qualify for a mortgage and what can you do to increase your chances of approval?
Every lender is different but here are answers to some of the most common questions.
Will mortgage lenders take into account all of my income?
The maximum mortgage that lenders will lend you is generally 3.5 times your gross annual income and 90% of the property value for first-time buyers
Your gross annual income means your income before tax but remember that mortgage lenders will generally only consider guaranteed income from your employer.
If your salary is made up of a base salary plus bonuses then they may choose not to accept the bonuses as part of your income if they are not guaranteed.
Similarly, if overtime makes up a proportion of your gross income, lenders may or may not include it in your gross income depending on whether you can demonstrate that you’ve regularly received overtime payments in the past.
Will lenders turn me down because I’m employed on a contract?
Generally speaking, lenders prefer to approve mortgages to people who are in full-time employment.
But the nature of work is changing and more people are now employed on contract in, for example, technology and pharma jobs.
If you are on contract, lenders will want to look into the type of contract you have, how long it is for and your past history of contract employment.
They will try to work out how likely it is that you will keep earning at the same level over time.
Will lenders turn me down because of my credit history?
Even if you no longer have any loans or credit card debt, today, a mortgage lender may turn you down because you have a poor credit history based on past loans.
They will be particularly wary if you have ever failed to repay a loan in full or have had a loan term adjusted because of difficulty repaying a loan.
Lenders may check with the two Irish credit reference agencies the ICB (Irish Credit Bureau) and the CCR (Central Credit Register) to get your credit history.
You can contact these agencies to check that there are no mistakes on your credit history.
If you find a mistake, both ICB and CCR have processes you can use to correct them.
Will I still qualify if I have outstanding loans?
You may be more likely to get a mortgage if you pay off any outstanding loans and credit card balances before you apply.
However, lenders will look at the total amount of credit available to you and may still consider your application if you have only borrowed a small amount of money and you are well within your credit limit.
The total amount of credit available to you will include your available credit on credit cards up to your limits and on agreed overdrafts.
I’ve no credit history, will I be qualify for a mortgage?
You do not need a credit history to qualify for a mortgage – there’s no need to take out a loan or a credit card simply to get a history - but you do need to show lenders that you can manage your finances responsibly.
Lenders will look at your current account and savings account bank statements to work out whether you are a credit risk or not.
Will I get turned down for a mortgage because I went overdrawn?
Going overdrawn regularly, if you have no agreed overdraft limit, will indicate to lenders that you are not on top of your finances.
But arranging an overdraft, in advance, because you have to manage a large expense may indicate to lenders that you are able to manage your money appropriately.