First steps for a first mortgage
There are far fewer options for mortgage hunters on the market than there were three years ago. But first time buyers make up the majority of home buyers in 2010/11 and are the ones that are keeping the market alive.
That said, lenders are extremely risk-averse and will force you to go through an enormous amount of paper-work before they approve a loan.
The first half of 2011 will be a turbulent period for the banks as they move to sell off assets and downsize. New owners may change their lending criteria, but we will keep up to date on this on the RTE Money website.
That said, you should remember when you are taking out a loan that you are actually buying a product.
Buying a house probably represents a lifetime’s biggest purchase – a big reason not to be afraid to shop around and compare and contrast interest rates and terms and conditions in any mortgage.
First-time buyers can be subjected to a bamboozling amount of information but a good way to start is to phone three or four banks and ask what the repayments would be per month on your mortgage for three types of mortgages.
Check the mortgage rates - there are charts in the Sunday papers and then work out what your repayments might be with the mortgage calculator on itsyourmoney.ie, which is part of the Consumer Agency.
Mortgage calculator: check you mortgage repayments
How much can I borrow?
100% mortgages no longer exist, so borrowers will need to have a deposit of between 8% and 10% of the purchase price.
In practice, lenders like to see a minimum income of €30k for an individual, or €45k for a couple.
If you are on the affordable housing scheme you may be able to borrow more.
The absolute amount you can borrow will depend on your income, your credit record and your existing exposure to debt.
In the boom years, banks tended to lend multiples of up to seven or eight times salary. Mortgage brokers report that in some cases, multiples of 10 times a salary were lent.
This however is no longer the case and multiples of 3.5 to 4 times a salary are more likely to apply.
However banks will not use your salary alone to assess how much they will lend. They now look at your debt service ratio or DSR - your ability to cover your loans of any kind.
So if you have two car loans, for instance, you will be lent less.
