Bidding on a house without official mortgage approval

leahyl

Is this really a no no? I am going to view a house I am really interested in next week and I'm thinking that if I bid then that bid is accepted, I won't have mortgage approval in place, I have it in principle but that's not worth much.

I have been approved twice before with another bank but never found the right property for me.

I am fairly confident that I will get mortgage approval without too many problems as I have a fairly large deposit so the mortgage wouldn't be too big anyway - so I wouldn't even need the amount I would likely get approved for.

Also, I thought that you couldn't get mortgage approval without having the address for the property on it.

Thanks

colm_c

Once you have approval in principal (apart from the PTSB 15 minute one), then you should feel free to bid away.

Don't think anyone gets full mortgage approval before bidding as it's tied to the value of the individual property.

ABajaninCork

Personally speaking, I wouldn't bid until I had that approval in my hand. From what you say, getting approval shouldn't be a problem, so I'd get that in hand ASAP. Having it marks you out as a serious buyer and not a tyre kicker.

I don't know how the approval process works here, but when I bought in the UK years ago, the address wasn't necessary. An approval is simply a statement saying you can afford the mortgage.

leahyl

Thanks guys, it was the PTSB approval I was talking about...haha - well my dad went and inquired for me a few months ago and was told that with my savings and history that i should have no problem getting a mortgage with them. Should I get in contact with them again so and arrange to meet with someone? I'm not even sure obv that I will get this house but my fingers and toes are crossed for this one!

ABajaninCork

Uh -YES!! Your Dad asking isn't mortgage approval...

I wouldn't get one from the bank either. Get a broker to do the running around for you. Make that call first thing!!!

leahyl

ABajaninCork wrote: »

Uh -YES!! Your Dad asking isn't mortgage approval...

I wouldn't get one from the bank either. Get a broker to do the running around for you. Make that call first thing!!!

Don't you have to pay a broker to do that though?

By the way, I understand that my dad asking isn't mortgage approval....

BattleCorp

ABajaninCork wrote: »

Uh -YES!! Your Dad asking isn't mortgage approval...

I wouldn't get one from the bank either. Get a broker to do the running around for you. Make that call first thing!!!

To get full mortgage approval, the bank's valuer will have to do a valuation on the house. The bank won't release funds if it thinks that the property isn't worth the value of the mortgage.

You would be taking a chance bidding, but if your circumstances are good, then it's only a small risk.

TheDriver

Depends where u are in country and you also know if you are good or not e.g. Perm job looking for 50% mortgage will prob be fine. I have never got asked if i had it in place

leahyl

BattleCorp wrote: »

To get full mortgage approval, the bank's valuer will have to do a valuation on the house. The bank won't release funds if it thinks that the property isn't worth the value of the mortgage.

You would be taking a chance bidding, but if your circumstances are good, then it's only a small risk.

Thanks BattleCorp, like I said I would have a fairly good deposit so I don't think there would be an issue with the bank thinking the property isn't worth the value of the mortgage.

I'm just so confused at this stage, reading about applying for mortgages and different banks operate differently it seems so not sure how to proceed.

I bank with PTSB also so I assume it would be easier to get the approval as they have all my banking information.

ABajaninCork

leahyl wrote: »

Don't you have to pay a broker to do that though?

By the way, I understand that my dad asking isn't mortgage approval....

My dry SoH strikes again...

No. You shouldn't have to pay a broker. They will get their commission from whoever gives you the mortgage. They'll be the ones shopping around to get you the best possible rate. Any broker that asks for payment? RUN!!

L1011

ABajaninCork wrote: »

My dry SoH strikes again...

No. You shouldn't have to pay a broker. They will get their commission from whoever gives you the mortgage. They'll be the ones shopping around to get you the best possible rate. Any broker that asks for payment? RUN!!

Some banks no longer pay commission to brokers. Brokers that work entirely on a commission basis hence won't sell you their products meaning you don't get the full range of the market offered. You may end up paying a lot more than a broker's fee on the dearer mortgage.

The best structure is a pay and repay setup - you pay the broker; they give you the full commission if they get any.

nj78

Absolutely you should bid based on approval in principle. You will not get full loan approval until you provide the address of the property to be purchased - you can't get that without bidding and getting to sale agreed.

Regarding brokers - standard practice would be for you to pay a fee up front which is fully refundable once the mortgage is drawn down. This is fair enough to help brokers weed out timewasters. As was already pointed out though, brokers may not necessarily deal with all mortgage providers

SK76

I'd call in to a broker and have a chat - explain your situation and see what they say - don't sign anything and you would be under no obligation. See what rates etc they can get you. Call to your own bank as well and ask what's the best they can do. Take away the info and decide from there

MouseTail

OP you do not have approval in principle, and you should not be bidding. Your father having a chat with the bank, and them saying, yeah, in principle your son could get a mortgage is not Approval in Principle. That is only given when you have supplied documentation, payslips etc, and it has been processed centrally. You then get notification you have approval in principle up to €x and it is valid for y amount of time.

leahyl

Looks like I'm getting 2 different opinions here - some saying I should and others saying I shouldn't.

I don't understand how I could have mortgage approval beforehand when I don't even know how much of a loan I will need (depends on the property).

I think I might just drop the guy in the bank an email and ask him the best course of action.

Thanks all

cpoh1

leahyl wrote: »

Looks like I'm getting 2 different opinions here - some saying I should and others saying I shouldn't.

I don't understand how I could have mortgage approval beforehand when I don't even know how much of a loan I will need (depends on the property).

I think I might just drop the guy in the bank an email and ask him the best course of action.

Thanks all

You need to drop into a bank and tell them you want to borrow X, fill out an application form and take the week or so to get it processed.

Full mortgage approval will involve forensic review of over 12months of bank statements to back the above up.

leahyl

cpoh1 wrote: »

You need to drop into a bank and tell them you want to borrow X, fill out an application form and take the week or so to get it processed.

Full mortgage approval will involve forensic review of over 12months of bank statements to back the above up.

Ok, I can't go to bank at the moment with work, so will have to email the manager (I have a contact card for him).

Thanks

Little Miss Cutie

leahyl wrote: »

Ok, I can't go to bank at the moment with work, so will have to email the manager (I have a contact card for him).

Thanks

Hi OP

Most banks allow you to apply over the phone with the mortgage team or online - not sure you can do this with the manager over the phone.

We are in the final stages of buying house, we were looking for over 2 years and never bid before we had approval in principal. Over the last 2 years we have had to reapply and provide fresh bank statements etc although it was extra work we always knew where we stood and what we could realistically afford to borrow.

Most of the agents we have dealt with checked we had approval before considering our offer on a property.

Good luck with your search!

Sunny Dayz

You would be best to have some mortage application underway with your desired banks. We bought a house last year and we had approval in principle with two banks from the previous summer. They would ring every so often to see how our house buying was going until we found our house and decided which bank to use.

When our offer was being considered for the house, the estate agent came back and said that the seller (receivership sale) was looking for proof of funding - ie that we had mortgage approval. Our lender did up a quick letter to say we were appoved in principle for our offering price for the property.

Also, for your own peace of mind, you should have an idea from your bank/broker how much approx you can draw down on a morgage based on your earnings and savings. This gives you your budget then for your house hunting. It would be awful to find your dream home and them to find out the bank won't given you enough!

MammaZita

leahyl wrote: »

Looks like I'm getting 2 different opinions here - some saying I should and others saying I shouldn't.

I don't understand how I could have mortgage approval beforehand when I don't even know how much of a loan I will need (depends on the property).

I think I might just drop the guy in the bank an email and ask him the best course of action.

Thanks all

You're getting 2 different answers as your post is misleading!

You say you have AIP- you don't- you have someone in a bank tell your dad you're good for a mortgage- which is meaningless.

rabwaygal

Sorry for going slightly off thread here:

When the EA comes looking for proof of funds I presume the letter from the bank will show the max borrowing capacity?

Would this not put you at a disadvantage if you are bidding significantly below the max borrowings?

How would you get around this?

MouseTail

If you are using a broker, they write a letter saying you have adequate approval for the bid. I would never let the EA know the max you are approved for.

DavyD_83

rabwaygal wrote: »

Sorry for going slightly off thread here:

When the EA comes looking for proof of funds I presume the letter from the bank will show the max borrowing capacity?

Would this not put you at a disadvantage if you are bidding significantly below the max borrowings?

How would you get around this?

As far as I am aware, and there are a few threads asking this, you are under no obligation to provide proof of approval.
Obviously, the problem there is that the EA is under no obligation to accept your offer, so could be a stalemate.
If broker is involved, they will send a standard leter stating that you have sufficient funding. Not sure if a letter of this sort from yourself would have same effect.
I have often seen advice to never give details of working budget or approval value to an EA, as you risk the EA holding out til you reach your max (which they would then know).
Also, we bid and went sale agreed before actually applying for mortgage (we had broker on board and were trying to improve savings etc; was in 2012), so it can be done.
Probably not to be recommended though.

Sunny Dayz

rabwaygal wrote: »

Sorry for going slightly off thread here:

When the EA comes looking for proof of funds I presume the letter from the bank will show the max borrowing capacity?

Would this not put you at a disadvantage if you are bidding significantly below the max borrowings?

How would you get around this?

Our letter just said we had sufficient funding from our lender to support our asking price of €X. We had approval for more than our asking price which was not stated on the letter.

rabwaygal

MouseTail wrote: »

If you are using a broker, they write a letter saying you have adequate approval for the bid. I would never let the EA know the max you are approved for.

Thanks guys. Yeah we had the EA asking our approved amount so we played it safe.

Like the OP we found it very tempting to bid on a house without approval, but held back. Its exciting when you start looking at houses, and you just want to get a house. I suppose its good to let that inital excitement die down and then approach the whole process with minimal emotions.

cookiecakes

OP I think you will find yourself in a bit of a bind if you have a bid accepted and you don't have approval in principle. Our estate agent looked for a letter confirming this from the bank as soon as our bid was accepted and we had to present it along with deposit in order to go sale agreed. We were in with the bank for about an hour to get ours but it meant we only looked at places that we could reasonably afford. You could end up being very disappointed if you are looking for houses that are way out of your price range!

TheDriver

I have never been asked for it even when sale agreed but then again,its not Dublin

leahyl

cookiecakes wrote: »

OP I think you will find yourself in a bit of a bind if you have a bid accepted and you don't have approval in principle. Our estate agent looked for a letter confirming this from the bank as soon as our bid was accepted and we had to present it along with deposit in order to go sale agreed. We were in with the bank for about an hour to get ours but it meant we only looked at places that we could reasonably afford. You could end up being very disappointed if you are looking for houses that are way out of your price range!

Thanks, I'm not looking at houses way out of my price range though - I have a large deposit and will also be getting a gift from my parents so I don't anticipate there being a problem getting a mortgage.

Regarding the other poster who said I was being misleading - what is the 15 minute chat then that PTSB refer to as being AIP?? Ok I didn't speak with the bank directly myself but my father is aware what savings I have etc. and based on this information that he gave to the guy in there, I got a write out of what I could potentially borrow (as in written in pen now, not a printed letter or anything) - but this is what PTSB say on their website is AIP.

MammaZita

leahyl wrote: »

Thanks, I'm not looking at houses way out of my price range though - I have a large deposit and will also be getting a gift from my parents so I don't anticipate there being a problem getting a mortgage.

Regarding the other poster who said I was being misleading - what is the 15 minute chat then that PTSB refer to as being AIP?? Ok I didn't speak with the bank directly myself but my father is aware what savings I have etc. and based on this information that he gave to the guy in there, I got a write out of what I could potentially borrow (as in written in pen now, not a printed letter or anything) - but this is what PTSB say on their website is AIP.

That is not approval in principal!!! If you had AIP you'd know as YOU would have spoken to the bank, not your father.

MouseTail

That is not approval in principle. The bank has not even had sight of your payslips, or verification of your savings. What you have is worthless. Just get your official approval in principle sorted, and then go looking.

leahyl

MammaZita wrote: »

That is not approval in principal!!!

Well that's what they are calling it!

From PTSB website:

"What is Approval in Principle?

Approval in Principle is based on the initial information you provide when you meet us. While it's not legally binding, it will give you an indication of how much we could lend to you. How much we will lend will be based on a full credit and suitability assessment. Don't worry - you won't have to study!

It's a good place to start when you're thinking of buying and what's more, you could get Approval In Principle in just 15 minutes. Then you'll know just how much you can afford and whether a rooftop infinity pool and helipad are realistic or not...

Four things to know about Approval in Principle
•You could get Approval in Principle by dropping into your local branch or we can call you back and arrange an appointment for you.
•You don't need to provide anything for Approval in Principle, it's simply a chat about your finances.
•We'll ask you about how much you earn, what loans you have and what type of mortgage you're looking for (i.e. how much you want to borrow and for how long) - this all helps us to decide how much we could lend you.
•This amount could then be 'approved in principle' based on the information you've told us

When you're ready for the full application, you'll need to bring in proof of how much you earn and your loans - find out what documents we may need here. If these all match the information you've provided and the credit check we run comes back ok, your full approval shouldn't differ from the amount we've approved in principle. (Unless you've won the lotto in the meantime, even then we'll probably need proof of your winning ticket!)

MammaZita

leahyl wrote: »

Well that's what they are calling it!

From PTSB website:

"What is Approval in Principle?

Approval in Principle is based on the initial information you provide when you meet us. While it's not legally binding, it will give you an indication of how much we could lend to you. How much we will lend will be based on a full credit and suitability assessment. Don't worry - you won't have to study!

It's a good place to start when you're thinking of buying and what's more, you could get Approval In Principle in just 15 minutes. Then you'll know just how much you can afford and whether a rooftop infinity pool and helipad are realistic or not...

Four things to know about Approval in Principle
•You could get Approval in Principle by dropping into your local branch or we can call you back and arrange an appointment for you.
•You don't need to provide anything for Approval in Principle, it's simply a chat about your finances.
•We'll ask you about how much you earn, what loans you have and what type of mortgage you're looking for (i.e. how much you want to borrow and for how long) - this all helps us to decide how much we could lend you.
•This amount could then be 'approved in principle' based on the information you've told us

When you're ready for the full application, you'll need to bring in proof of how much you earn and your loans - find out what documents we may need here. If these all match the information you've provided and the credit check we run comes back ok, your full approval shouldn't differ from the amount we've approved in principle. (Unless you've won the lotto in the meantime, even then we'll probably need proof of your winning ticket!)

You're missing a very important word- YOU- not your father!!!

cookiecakes

leahyl wrote: »

Regarding the other poster who said I was being misleading - what is the 15 minute chat then that PTSB refer to as being AIP?? Ok I didn't speak with the bank directly myself but my father is aware what savings I have etc. and based on this information that he gave to the guy in there, I got a write out of what I could potentially borrow (as in written in pen now, not a printed letter or anything) - but this is what PTSB say on their website is AIP.

I know when we went for our AIP meeting, they went through everything. How much we spend on entertainment, food, clothes, what different charges were on our statements, really in-depth. At the end of it, we got a proper printed letter stating how much we were approved for in principle.

I don't think you're being misleading, I think you might just be a bit confused about what it is they actually do to give you AIP. What they hypothetically told your dad you could borrow could be very different from what they tell you you can borrow when they look at all your finances. I think you really should go and meet with them yourself so you have a firm idea of what you're working with. I know I felt tons better after we'd chatted with them!

leahyl

cookiecakes wrote: »

I know when we went for our AIP meeting, they went through everything. How much we spend on entertainment, food, clothes, what different charges were on our statements, really in-depth. At the end of it, we got a proper printed letter stating how much we were approved for in principle.

I don't think you're being misleading, I think you might just be a bit confused about what it is they actually do to give you AIP. What they hypothetically told your dad you could borrow could be very different from what they tell you you can borrow when they look at all your finances. I think you really should go and meet with them yourself so you have a firm idea of what you're working with. I know I felt tons better after we'd chatted with them!

Don't get me wrong - I know I have to go and see them myself but you're right, I am confused as to what AIP actually is I guess.

Do they give you a letter when you get approval in principle?

Sunny Dayz

http://personal.aib.ie/content/dam/aib/personal/docs/our-products/mortgages/step-by-step-guide.pdf

AIB call it a Sanction in Principle. The link above is a good guide on the mortgage process. By your posts above, you seem to have completed steps one and two.

The_Morrigan

leahyl I would suggest you go and get your ducks in a row here - the process is frustrating enough without skipping ahead on some steps.
Step back from the viewing & bidding and get yourself some (ie more than one bank) approvals in principle, then knowing the upper limit of your approval you can then see how you're fixed with regards to bidding on properties.

leahyl

Sunny Dayz wrote: »

http://personal.aib.ie/content/dam/aib/personal/docs/our-products/mortgages/step-by-step-guide.pdf

AIB call it a Sanction in Principle. The link above is a good guide on the mortgage process. By your posts above, you seem to have completed steps one and two.

Cheers Sunny Dayz.

I am sorting out my documentation also at present. I have just put in a request for an appointment with the bank on Monday to, hopefully, get the AIP.

MammaZita

The_Morrigan wrote: »

leahyl I would suggest you go and get your ducks in a row here - the process is frustrating enough without skipping ahead on some steps.
Step back from the viewing & bidding and get yourself some (ie more than one bank) approvals in principle, then knowing the upper limit of your approval you can then see how you're fixed with regards to bidding on properties.

I agree. There's a big difference between what you think you can afford and what the bank will approve. There are also non-financial factors like your occupation, whether you're permanent etc which they will need to consider too.

leahyl

MammaZita wrote: »

I agree. There's a big difference between what you think you can afford and what the bank will approve. There are also non-financial factors like your occupation, whether you're permanent etc which they will need to consider too.

I do understand all that, thanks MammaZita, I have been looking for the right property for a few years now and am a bit demented at this stage. I have had approval from another bank before this but decided to try my own bank instead as the other bank kept moving the goalposts as to what I was allowed to borrow (each time I went back to renew the AIP as I never found the right property within the 3 mnths they give you!)

I am in full time permanent employment for 6 years, significant savings, no loans and will also be getting a gift from my parents towards the deposit. I would be very surprised if they didn't give me some sort of mortgage- but then stranger things have happened.

Fingers crossed.

TheDriver

The one thing that strikes me is a gift towards the deposit, you should have your own savings for that. They could gift you some cash for the end price though...

leahyl

TheDriver wrote: »

The one thing that strikes me is a gift towards the deposit, you should have your own savings for that. They could gift you some cash for the end price though...

I have my own savings plus a gift from my parents - why would this matter?

L1011

leahyl wrote: »

I have my own savings plus a gift from my parents - why would this matter?

Banks will want to see a substantial amount of savings that are over and above any gift - both ends of the transfer chain if there's multiple accounts involved. If you've got that, a gift as well its not an issue.

leahyl

MYOB wrote: »

Banks will want to see a substantial amount of savings that are over and above any gift - both ends of the transfer chain if there's multiple accounts involved. If you've got that, a gift as well its not an issue.

Well the gift and the deposit are the same amount - surely that wouldn't be an issue? It's significant savings

cpoh1

leahyl wrote: »

Well the gift and the deposit are the same amount - surely that wouldn't be an issue? It's significant savings

It really depends on the amount of your savings, and the amount you are borrowing for the house. A lot of banks don't like that a significant portion of your deposit wont be coming from dedicated savings over a period of time.

I would be cautious if I were you and wait until you have met with the bank. A lot of stuff we took for granted before our mortgage approval was sticky with the banks when sealing the deal.

leahyl

cpoh1 wrote: »

It really depends on the amount of your savings, and the amount you are borrowing for the house. A lot of banks don't like that a significant portion of your deposit wont be coming from dedicated savings over a period of time.

I would be cautious if I were you and wait until you have met with the bank. A lot of stuff we took for granted before our mortgage approval was sticky with the banks when sealing the deal.

Ok fair enough, hopefully it won't be an issue though.

OMD

MouseTail wrote: »

OP you do not have approval in principle, and you should not be bidding. Your father having a chat with the bank, and them saying, yeah, in principle your son could get a mortgage is not Approval in Principle. That is only given when you have supplied documentation, payslips etc, and it has been processed centrally. You then get notification you have approval in principle up to €x and it is valid for y amount of time.

This is not true. You do not need approval in principle to bid. I have bid and bought numerous times and never sought approval in principle and cannot think of any time when I would seek it. It depends on your own circumstances but I have always considered it a waste of time. Worst case scenario you only find out you cannot afford a property after you bid on it.
Don't be afraid to lie to auctioneers. (In fact as a rule of thumb do lie to them). They are not afraid to lie/be economical with the truth to you.

Little Miss Cutie

leahyl wrote: »

Well the gift and the deposit are the same amount - surely that wouldn't be an issue? It's significant savings

I guess the really issue might be if you have 5% of the purchase price saved and 5% comes from a gift, the bank will not see this as substantial savings.

However if you have saved for example 20% of the purchase price and the gift is 20% I don't think the bank would have any issue.

The real issue will be what you have saved. Also how you have saved it, do you have a direct debit each month for savings, did you make withdrawals from your savings account ( this proves you can leave without the money each month) etc.......

I have a friend who received AIP for approx 280k however full approval was much lower around 175k when all the factors were considered so best to get a realistic figure from the banks.

leahyl

Little Miss Cutie wrote: »

I guess the really issue might be if you have 5% of the purchase price saved and 5% comes from a gift, the bank will not see this as substantial savings.

However if you have saved for example 20% of the purchase price and the gift is 20% I don't the bank would have any issue.

The real issue will be what you have saved. Also how you have saved it, do you have a direct debit each month for savings, did you make withdrawals from your savings account ( this proves you can leave without the money each month) etc.......

I have a friend who received AIP for approx 280k however full approval was much lower around 175k when all the factors were considered so best to get a realistic figure from the banks.

Oh no, I have quite a good bit more than the 10% deposit that would be required - even with just my own savings - so that's why I don't think there will be an issue.

Thanks Little Miss Cutie

Sunny Dayz

Little Miss Cutie wrote: »

I have a friend who received AIP for approx 280k however full approval was much lower around 175k when all the factors were considered so best to get a realistic figure from the banks.

This.

Going by the online calculators the various lenders have on their website, we were in line for a decent mortgage, but the actual max we were approved for was a bit lower.

BookBook

For me houses that meet most of my requirements are few are far between. Don't let one you really like slip away.

Ask yourself what have you got to lose if you do bid on a house you really want without proper approval? You may lose the house but if you wait until you have proper approval the chance of losing the house is even bigger.


Between the time I met my mortgage broker and filled out the forms and actually got approval back took a full month which really surprised us and then approval only lasts for 4 months.

With one house we couldn't submit a bid without getting a mortgage approval letter (and ending up being highest bidder but they sold to cash buyer for less), with another we weren't asked for anything (but got outbid very near the end) and with the most recent one we were only asked for mortgage approval after a bidding war and being told our offer was 'provisionally accepted'.

What ever you do best of luck.

leahyl

Hi all, just an update, went to see this house yesterday and put in an offer this morning - it's perfect location wise, does need a bit of cosmetic work and a new kitchen but is a very solid house.

I have made an appointment with the bank for Monday afternoon so I can get cracking on the mortgage approval.

Fingers crossed that my offer is accepted. Thanks for all the advice

Just one more question - when I put in the offer the estate agent said "it's early days yet" - which it is, as the house only went up last week, and I'd say I was one of the first to see it yesterday; but he said he would be in contact with me. I was just wondering, if he doesn't get back to me within a week should I be ringing him? I really don't want to miss out on this property but I don't want to seem too eager either obviously.

Thanks