Do's and don'ts for first time buyers

3DataModem wrote: »

Having loan commitments will improve credit history, but also reduce borrowing power.

A broker can help give the best advice on the balance between the two.

Jen Pigs Fly wrote: »

I bought recently - went drawdown this January.

I had the following:
Overdraft facility, did not go into it for a few months, bank didn’t care that I had an overdraft
Himself had a car loan, caused no problems, just went into our overall stress test.

Mortgage protection didn’t care too much a bout smoker status,they just add a loading to the premium. we got a loading because I have a pre existing condition. I think the difference was like €10 a month extra for a smoker vs non smoker. We have a pre existing condition loading and our mortgage insurance is €50 a month. It’s grand like.

We bought new beds, new sofas, new kitchen. It can be done.

Buying a house isn’t all doom, bread and butter. We were saving a **** tonne of money, and were still able to go for meals in Eddie rockets, TGIs, etc every weekend.

People seem to think that you need to save every penny and have no life, we had few lifestyle changes while saving, in fact, our broker said it looked better cause we wernt pouring every cent into savings. Banks like to see that you can afford to live too.

Any questions just ask.

Black_Knight wrote: »

What are you doing to save already OP?

There's some simple things like put money aside as soon as you get paid. Rent, savings, bills (estimated based on your last years usage), groceries etc could all be transferred out of your current account (we used a joint account) as soon as you get paid, and what's leftover is yours to do as you wish.

What are your reoccuring payments?
Phone bills, broadband, TV, netflix, spotify etc. Can any of those be reduced? gomo are a cheap phone provider.
Always switch your broadband/tv provider, even threatening to cancel they'll usually reduce your bills by a nice ammount (virgin do/did anyways).
Can you share netflix or spotify with family?
They're small, but they add up.

Gas/Electric - Switch these every year, using bonkers (and old bills to get accurate readings) to get the best deal. Hundreds to be saved.

You've proved you can repay your car loan, but is it worth paying the interest to prove that point? Does it make more sense to pay it off?

Do ye know when ye want to buy, and approx how much ye might require? That'll tell you straight away how much you need to save every month.
Solicitor fees, stamp duty, furnishings will be several thousand too. Don't forget to factor those in.

laserlad2010 wrote: »

It's actually really simple.

The banks want to see regular savings.
They will take your savings for 6 months, and divide it by 6. Minus any withdrawals. If you take out money every month they don't like it.

Usually they stress test you to around 6%, which means they rack your repayments up to 6% on the calculator - that's your repayment capacity.

(Rent+savings) - (loans+child) (~250p/m) = your repayment capacity.

They don't really mind that your outgoings are after that, but if you're spending a few hundred a month on discretionary items and that means you're not saving as much as you can... then that to me seems silly.

If you have a deposit built then why not go all out during the coronavirus for 6 months and save a mad amount by direct debit, clean up your account, clear the loan etc. Clearing the loan gives you a better credit score but it's not like America where you start with no credit score and need to build it up. You start off with a fine score it's defaults that drag it down.

buffin wrote: »

A good mortgage broker is worth their weight in gold. I loved ours. We (and several of my friends) wouldn't have their home without her. Find one who seems to really go the extra mile. She wrote letters for us when we were bidding confirming that we had sufficient funds.

Line up a solicitor and know their fees so that when you reach that stage you'll be ready. Same with a structural engineer to do a survey for you.

Start looking at houses. We spent Saturday mornings for years popping into open houses. You learn what to look for. When we finally found the house we got, we knew it didn't have any of the concerns we'd had with other properties. You'll learn what your non-negotiables are by just looking at places.

Get to know areas - we'd literally pick an area like Phibsboro and see every open house we could in that area that morning. We'd walk it and see parks / cafes etc along the way. Especially important if you're looking at an area you don't currently live in. You'll soon see there are some better / quieter / more tree lined roads that make a difference etc. We ended up buying in an area we hadn't expected but we'd gotten to know and love through looking and it was a cheaper area than we'd originally hoped for. And we get a whole lot more house.

If there are houses that you think might fit the bill start calling the estate agents and asking what the latest bid is. Try track houses and see how much they end up going for. Look for when they appear on the property price register as the actual sale price. The asking price is just an indication.

We soon saw that houses we liked typically went for 10% above asking if it was livable, but 20% above if it was renovated and lovely - and 10-20% less if it was unlivable. We ended up going with unlivable that could be made lovely with less than 30% cost if that makes sense?

We loved looking at houses enough that we found saving easier when we were looking and starting to hope!

Best of luck with it all - the time will really fly in the end. Just keep making smart choices with money and you'll get there!

Black_Knight wrote: »

Meter outside the house has nothing to do with changing gas/electric provider. If you've never done this, you're most certainly going to save money if you do. Perhaps not much, but some.

Fyi, some mortgage brokers are free, some charge. I got lucky and our pension provider at work did mortgages, and got us a great one, for free.

So, Christmas 2021. That's 18 months away. How much more do you need for a deposit, and add 10k to that to cover stamp duty, solicitors fees, valuation, engineer report, and some basic furniture.

Divide that number by 18 and that's what you need to average every month into savings for the next 18 months. Very rough guide, but it's a start

Black_Knight wrote: »

Banks won't care about that. They'll approve you for as much as you can borrow. Then you can go for new houses with the help to buy scheme, or second hand houses. End of the day, the banks just want an independent valuation that says the house is worth around what you've paid for it.

So you need 10k to make up a good deposit? Plus 10k as I mentioned for expenses. So 20k in 18 months. Bit over 1k into savings every month gets you there.

Black_Knight wrote: »

Fyi, winter months are slow for properties, so most come off the market of things are slow. Dark and rainy days don't paint the picture of "our forever home". We capitalised on this. Bought our house in November. No counter offers. Feel like we got good value.

cannotlogin wrote: »

Someone mentioned it already but you really need to build a regular track record of savings, not building up an account with the surplus at the end of the money.

Commit to putting aside X amount of savings on payfate into a savings account so the Bank can see a build up on a regular basis. By all means top it up, the months you have extra spare cash but you have to do a minimum regular amount. My partner is on the same boat. All saving but not exactly sure what the process is.

Ideally you need to build up a 12 month track record where your regular savings and your rent, exceed or at very minimum match for likely mortgage repayment each month.

Run a few figures on a mortgage calculator to see what the mortgage will cost. This is your target - you need to prove to the Bank you will have this figure available every month (rent & savings).

jrosen wrote: »

Financially we cleaned up our accounts. We had a crazy amount of transactions. Tap tap tap basically.
We spent 2 months tracking our spending. We worked out what we spent on groceries, petrol, dinner out, social life, coffee, clothing etc. We reigned in all our spending and created a budget. We allocated 20 euro a week to ourselves for misc sending. We had a spread sheet and we filled in anything we spent. We transferred our savings on pay day so the money was gone.

We had 2 savings accounts. Banks in our experience want to see consistency. We wanted to save the exact same amount each month and not touch it but we also wanted access to money if something cropped up. So we split our savings 80/20.

We drove around areas that were on our list at different times of the day and week. We looked at numerous properties so we could figure out what we wanted.

Tomspud wrote: »

Apologies if this was already said but my experience was.

Save consistently - this should be more than the mortgage repayment will be per month. Best to show 10 or 20% on top of that. You can save more but not less. Rent can be factored into this figure.

Gambling - Really not liked whether it's big or small. Best to have 6 months of clean accounts. Ulster bank only ask for 3 months btw.

Any large expenses be prepared to speak about them. Seems to me these are fine if they are justifiable.

Meals, takeaways, holidays -didn't seem to an issue.

When you are approved in principle start looking at houses. Look at multiple houses and dont overly attach yourself to any. I would suggest to go all the way with any you can. Many sales fall through late and you will only be approved for 6 mo this before you need to resubmit forms again.

Do your maths most likely you will need 10% of mortgage in cash(this can be used as deposit with auctioneer to go sale agreed) . You will also need solicitor pay which couples in land registry fees , title searches extra. You'll be looking at a about 2000 ish. Speak to a local solicitor and agree a price. You'll need an engineers report which is about 400.
On top of this would suggest some wiggle room as you may also need to have drains checked , plumbers, electricians check. This is up to yourself for piece of mind and most likely engineer advise if needed.

You'll also need mortgage protection which is about 20ish a month. The bank will try to push some crowd on you. I found their offer over priced. About 60 a month whereas I got it for 20 through another. I thought the bank threw a strop when I didn't go with their preferred provider. Forms started to get lost . Btw banks wont release funds until they are marked as the beneficiary of thos policy , cant remember the exact term for this. But each bank has a specific procedure for doing this. I would suggest to have this sorted a mo th or two before you close. so as not to cause a delay and there will be a delay!
House insurance seems to be needed and definitly is for piece of mind. Although bank doesnt really care about proof of this. My guess is once your still alive to pay them then there happy.

If it's not a new house see if they will throw in furniture , fridge oven etc. Can always change it later.

Check the esb / gas and see how long it's been cut off. If no one is living there and hasn't been switched to the overall owners. Costs few hundred if off for a period of time. To over a grand for longer. Plus you got to schedule these to be turned back on

Know the area your buying schools , shops, traffic , nightlife, transport ,broadband and broadband speeds, sky/virgin in the area
Would also suss out the locals/neighbours and see what their like.

guyfawkes5 wrote: »

I'm close to drawdown at the moment and will echo some of the good advice given in this thread so far based on both experience and just chatting to multiple mortgage advisors at banks while going through the process with them:

- Saving literally as much as possible and making lifestyle adjustments in your payments like not going to restaurants is only as useful in how fast it gets you a deposit. After have the required deposit, banks don't really look at what you're spending on what you're saving so much as they look at your payment capacity. The literal test they apply is that could you service a monthly mortgage payment if interest rates rose by a certain percentage, and what's counted against this is stuff you absolutely have to spend money on. This means things more like child maintenance (this is why they ask you in the mortgage calculator forms) and less things like restaurants or bars.
- In the closing process, apply for mortgage insurance early as in some cases this can require a medical checkup and can delay things.
- The 'getting caught up in the bidding war' thing is real, as is getting so frustrated with constantly going to viewings that you're tempted to go over what you think a property really is worth. It's good to always try and reset yourself in these situations.
- If you're really interested in a property, get the BER rating number from the EA. They need it to legally complete the sale so should have it. It will accurately tell you a lot of information about the property that mightn't have necessarily been included in the ad - the BER rating itself, the square footage of the property, what year it was built, and so on. The BER rating of a property is also not just a measure of its insulation potential, it's also a general marker of the build quality of the house. It would be worrying to see a house that's ten years old have a low BER for example.
- There really is no substitute for exploring the neighbourhood in person at different times of day - an area is more than the evening you had the viewing at.
- If buying in Dublin, be aware of how any prospective property is affected by Bus Connects going through in a few years - it might result you in losing a bus service, or gaining much, much more if you're near a corridor.
- If not going through a broker, compare the lowest interest rates either through research or using this website. Generally the two best deals will be the one with the lowest interest rate and the one with the highest cashback, and you can decide which makes the most sense to you at the time (as cashback can be handy for all the early expenses you run into in a house). You can easily switch away from the cashback bank afterwards as it probably will have a higher interest rate (you keep the cashback in any scenario).
- It's possible to split your mortgage with a certain portion on the bank's fixed rate and a certain portion on their variable rate. You might choose to do this if you have significant capacity to overpay the mortgage (as you can overpay variable rate mortgages as much as you want, and there are usually limits on fixed rates).

Jen Pigs Fly wrote: »

We saved for a year to get a nice lump sum, we left a surplus of €10,000 to cover the solicitor, stamp duty, maintenance fees, broker fee if applicable, utility start up costs and a just in case pot.

We are able to do a salary deduction from our bank strait through to the credit union. We also paid rent and his car loan as DD.

So the banks looked at our savings + the rent paid - his car loan to come up with our stress test. We had a good pot build up before we talked to the broker, he gave us a 6 month target to reach as my overdraft caused a few problems, I needed to show 3 months of not going into it, but also didn’t need to get rid of it cause it showed the banks I was responsible 😂

As long as you put in the same amount, same time over 6 months the banks are usual ok. They will ask to see proof of funds for deposits and such. They also want to see you have a surplus for the items I listed above - solicitor etc.

I was questioned on iTunes payments, but after the end of each saving fortnight we still had cash to spend. After all of our own bills paid so they did not dwell too much on iTunes.

Health insurance is different, mortgage protection pays for the mortgage if a person dies, some health insurances do offer it. We did not go for life assurance as our work offers that, we get death benefit from work and union benefits. We will still be working by the time mortgage is paid (35 years) so our work benefits will be in play.

A good broker won’t steer your wrong, our guy looked at our statements each month and gave his opinion on our spending, and then when he felt we were ready he went for it. We had approval in principal in 2 days. Approval a week later. This was October last year, we went draw down January as we bought a new build.

Don’t forget in new builds you are paying 13.5% VAT, so your stamp duty is house price, less 13.5% @ 1%.