People often come to us with a mindset that getting mortgage approval is next to impossible, and that their application will be turned down if they are buying coffee every day or going on nights out etc. This isn’t the case. Lenders are open for business and eager for new customers, but there are some basic do’s and dont’s that will help build as strong an application as possible. We would recommend working with a broker (we would wouldn’t we!), to both build the strongest application possible, but also to make sure you are going to the best lender, as every lender not only offers different rates and deals, but also assess applications slightly differently.
Here are ur Top 5 tips for things you can do to Get Mortgage Ready:
- Set up savings as a Direct Debit
Tip no.1 is something everyone can action themselves, and it is saving into a separate savings account every month by direct debit. If your goal is to save X amount per month, then set up a Direct Debit for that amount for a few days after you get paid. This does two things. 1, it makes sure you save that amount every month, 2. it shows clearly to a bank that you have that much in savings, consistently, every month. This is a big part of any mortgage application
2. Keep a buffer in your current account
We often see that in an effort to save as much as possible every month, people end up running their current account down to €0 or very near it just before payday. This is something we always advise clients to avoid for the 6 months before their application, as it creates the impression that your finances are on a knife edge, which will be a concern to any lender. Always try to have a buffer of a couple of hundred euros at least in your current account so it doesn’t look like you are staggering towards payday every month.
3. Avoid or Cancel Credit Cards & Overdrafts
This may seem like an obvious one but it trips a lot of people up…. ‘If I use my credit card all the time but clear the balance, or make the minimum payment every month, what is the issue?’ If you are using a credit card or overdraft on a regular basis it is indicating that you are spending more than you earn, you need these facilities to bridge the gap as you do not have the money in hand. Ideally clear the balance on your credit card / overdraft and cancel it, or at the very least ensure that you clear the balance every month. This is a really important one!
4. Don’t take out new loans
If you are planning on making a mortgage application, avoid taking out any new loans in the 6-12 months before hand. Existing loans will reduce the amount a lender is willing to lend to you. Some people listen to financial advice from other countries like the US, where people are advised to take out loans as repaying them will build a good credit score, and you need this for a mortgage application. THAT IS NOT THE CASE IN IRELAND. We do not operate on the same credit score system. Where you have more than the required house deposit, use your additional savings over taking out new loans.
5. Avoid Online Gambling
Online gambling is one of the red flag issues for lenders, it doesn’t automatically mean your application will be rejected but it will certainly cause them concern. Gambling debts can accumulate and get bigger very quickly, and with online gambling the debt can be on credit, meaning you end up facing a large bill from the bookie! So they get nervous when they see people sending money across to their betting account on a regular basis.
These are just some of the main things that you can understand and get right yourself at home, when you are starting to get mortgage ready. In general they are also good financial habits so even if a mortgage is in the medium or long term, these tips will stand you in good stead.
