In this article we will explore what conditions you have to meet to be eligible for a mortgage in Ireland.
Employment situation
The number one factor determining whether you can get a mortgage in Ireland is your employment situation.
Employees
If you are an employee, you will need to provide documentation that you are employed on a permanent basis. As a standard practice the bank will review the last six months of your financial statements.
People who are self-employed or run a business
People who are self-employed or are business owners will need to show consistency in their earnings to the lender. The period under review in this case is longer and the lending institution may request financial statements going back two or three years.
Level of income
While having a job or business will determine if you are eligible for a mortgage, your level of income will determine how much you will be able to borrow.
The Central Bank of Ireland regulates the loan-to-income limits. According to the rules, the amount of the loan cannot exceed 3.5 times your gross income. In the case of a joint application, the total combined gross income is taken in to account.
Example #1:
Sole applicant
Gross income: €50,000
Maximum loan: €175,000
Example #2:
Joint application
Applicant #1 gross income: €50,000
Applicant #2 gross income: €29,000
Total gross income: €79,000
Maximum loan: €276,500
Savings
How much money you have saved is also taken into consideration during the mortgage application process.
This aspect is also regulated by Central Bank of Ireland. The loan-to-value limits set the minium amounts of savings--in terms of percentage value of the property--that you need to save to be eligible for a loan:
- minimum 10% deposit if you are a first-time buyer
- minimum 20% deposit if you are a second-time or subsequent buyer
- minimum 30% deposit if you are buying to let
Example #1:
First-time buyer
Home value: €260,000
Minimum deposit @ 10%: €26,000
Example #2:
Second-time buyer
Home value: €300,000
Minimum deposit @ 20%: €60,000
Central Bank of Ireland allows for some flexibility in terms of the loan-to-value and loan-to-income limits but it's much better keep your expectations within stadard limits listed above.
Other considerations
Section below provides some less formal tips that may prove useful for you in order to secure a mortgage decision.
Rental payments
When banks and other lenders determine if they can approve your mortgage application they look evidence that you can comfortably cover the monthly repayments.
If you are currently renting, your ability to make rent payments will be taken into account in that calculation. It is therefore very important that your rent payments are done through your bank account and clearly labelled on your statement.
Keep this in mind if your rental arrangement is less formal or still don in cash.
Debt
All lenders will do a review of your credit score. It is important to ensure that your debt--especially your credit card--is under control.
Large expenses and income
Lenders may question any large expenses and outgoings as well as income. They are obliged to do that under Anti-Money-Laundering legislation.
Non-standard outgoings, such as investments in Cryptocurrencies, may also be flagged by the lenders.
Gambling
Lenders frown upon gambling outgoings. If you are planning to buy a home, it is perhaps a good time to limit that spending.
Transfer titles
Finally, makes sure that you use consistent transfer names and avoid 'funny' transfer titles.
Conclusion
In order to secure a loan to get a house it is best to keep your finances as predictable and as boring as possible.