Banks have begun lending again but are now much stricter in applying lending criteria. Potential borrowers should be aware of the more obvious pitfalls when applying for a home loan.
You must first have saved the deposit of between 8% and 10% of the purchase price. You must also have saved the cost of legal fees which are likely to be between €1,500 and €2,000 plus Stamp Duty that will be 1% of the purchase price.
Affordability is the new buzz word in lending circles, so you need to show the lender that you have saved the amount of the mortgage repayment for the previous 6 months or that you have been paying rent equal to that amount. A lender will want to see copies of your bank current account statements for the previous six months. They will also want six month’s credit card statements and a statement for any other savings account you hold. Lenders will scrutinise those statements looking for comfort that you are living within your means and are able to afford the future mortgage repayments.
Items appearing on your statements that will cause a lender to refuse a loan are:
- Referral fees – debited for bounced cheques or unpaid direct debits or standing orders
- Exceeding your overdraft facility on a regular basis
- Using an online gambling facility is worrying for lenders
Similar rules apply for credit cards but in addition failure to make the minimum monthly repayment is also significant. By signing a loan application form, you give the lender permission to access your credit history that is held by the Irish Credit Bureau [ICB]. The ICB keeps a record of all your loans for a period of five years after the loan has finished. Missed payments on any loan or credit card within the last five years will show up on your credit report and this will adversely affect the lending decision. It makes sense to get a copy of your own credit report from ICB before you make any home loan application.