How are mortgage applications assessed?
Buying a house is likely to be the biggest purchase we make in our lives so it makes sense that a lot of detail goes into a mortgage application assessment. Knowing what to expect before you apply will be a great help to you.
Before applying for your mortgage, in order to have the best chance of approval it’s important (not to mention useful) to be aware of all of the factors that go into a mortgage assessment.
We’re aware of just how many moving parts there can be in the mortgage application process, but familiarising yourself with our handy list of common factors will keep you on the straight and narrow.
So remember, when applying for a mortgage, your lender will look at the following.
1. Your income
The obvious one, but when applying for a mortgage lenders will look at your annual income and some may even take bonuses or overtime into account. Some lenders may also factor in rental income if you plan to rent out spare rooms, so this is something to be aware of and discuss.
2. You savings
Next to income, a mortgage lender will want to see a clear and consistent track record of savings being made. This demonstrates to a lender that you have an ability to save, are responsible with your money, and have built up enough savings to cover your deposit as well as the other expenses that come with buying a home.
3. Your age
How old you are is another important factor lenders will consider, and for obvious reasons. This will include assessing the number of years you have left until you retire. Most lenders will only offer a mortgage up to the age of 66 or 67, meaning if you want to take out a mortgage over 30 years, for example, you'll have to apply well before you hit 40.
4. Outstanding loans
If you have other loans, this may reduce the amount of money you can borrow, or you may find it difficult to get a mortgage as you’ll be seen as higher risk, for example.
In addition to any loan repayments, lenders will look at any financial commitments you have, such as ongoing childcare costs, monthly bills, and so on.
6. Credit record
This shows the repayments you have made on any loans you have. If you have missed repayments in the past, it may make it more difficult for you to get a mortgage.
Mortgage lenders will also look for other potential red flags in your finances such as recurring payments made to online gambling platforms, for example.
7. The value of your house
This is the market value, or purchase price of your house.
8. The amount you need to borrow
This is the difference between the amount you have saved to put towards the house (your deposit), and the purchase price of the house. The amount of your home that you own is also referred to as your equity. In general, the bigger the deposit you have, the better. And Central Bank rules require most first-time buyers have a minimum deposit of 10% saved.
Whether anyone will act as guarantor by agreeing to repay the loan if you are not able to.
10. Anyone else?
Banks will also be interested in whether you are borrowing on your own or with someone else. If you're borrowing with someone else, then their savings record and outstanding loans etc as outlined above will also be reviewed.
What are the chances of my application getting approved?
As discussed above, your lender will check your credit history before they decide to give you a loan. Most lenders use the ICB (Irish Credit Bureau) or the new Central Bank CCR (Central Credit Register), which keep files on individual borrowers.
If you are turned down for a mortgage and you have never had problems repaying your loans, you may want to check your credit record.
You may be refused a mortgage if:
- Insufficient income: If your income is not sufficient to repay the amount you want to borrow. At present you’re restricted to borrowing only 3.5 times your gross annual income. For example, if your gross salary is €50,000, the maximum mortgage you could take out would be for €175,000 unless you can get an exemption.
- Poor credit history: If you have a poor credit history this may cause a lender to turn down your mortgage application, even if you can currently afford to repay a mortgage. Making sure you never miss a repayment on a loan is important for this reason.
- Existing loans: If you have too many outstanding loans or other financial commitments a lender can refuse you for a mortgage as they may not want to take on the risk, seeing you as overexposed.
- Job status: If your job is not permanent, is at risk or you have only recently started employment you may be refused a mortgage. Banks like to see certainty, stability, and an ability to make regular repayments. In general, you must have passed your probationary period in order to get approved.
- Financial history: You may be refused if your bank statements do not show that you can save or manage your money.
- Clearance: If the house you want to buy has not been approved by a valuer this could prove to be another obstacle. This could happen because the valuer thinks the property is overpriced.
Preparing to apply for your mortgage? Make sure to check out our other mortgage guides to make sure you are totally in the know throughout the process:
- You can find out about the Central Bank’s lending rules here.
- Learn about the Help to Buy incentive here, which is designed to help first-time buyers get the deposit needed to buy a newly built home.
- If you’re confused about the various types of rates on offer, take a look at our helpful interest rates explainer here.
- Many banks these days are offering cashback incentives, which are particularly appealing for first-time buyers. Learn more about whether mortgage cashback offers are good value here.
Start your mortgage journey with bonkers.ie
Whether you’re a first-time buyer, home mover or switcher, you can easily compare interest rates, offers and cashback incentives from all Ireland's lenders using our mortgage calculator.
And when it’s time to apply for your mortgage, you can submit an online enquiry through our new mortgage broker service and one of our experienced financial advisors will call you back to get your application started.
Our mortgage service is entirely free and is fully digital from start to finish, meaning everything can be carried online out from the comfort of your home. And it's completely paper-free too!
To find out more about our mortgage broker service, see here.
If you require any help or have any mortgage-related questions, we have an in-house team of qualified financial advisors who would be happy to help.