First-Time Buyer’s Guide to Buying a House
If you’re a fan of ‘80s pop, you’ll know Our House by Madness (it’s spectacular in much the same way that Total Eclipse of the Heart is also spectacular).
The Madness lads act out the lyrics around a big old Victorian house while glorious pop kicks in.
The ‘80s.
What a time.
Anyway.
It’s an epic tune for a house-buying playlist.
But long before you fire up your celebratory playlist (other tune suggestions include Take Me Home, Country Road and a bit of Bon Jovi), you’ll have to do the hard bit: getting a mortgage.
So, how do you go about getting a mortgage?
Well, if you’re in Dublin, you’ll probably look at house prices, cry a bit and give in to the inevitability of living out of your parent’s gaff for the next decade.
Be grand.
For everyone else?
Follow along.
1. Start Saving Your Deposit
Central Bank rules require first-time buyers to save a deposit of 10 per cent of the cost of the house.
It’s a big chunk of change and the hardest part about getting a house.
It’s gonna be rough.
You’ll get a lot of advice about giving up takeaway coffees and bringing lunch to work.
It would help if you did that.
And all the rest.
Essentially, accept that saving is your lifestyle now.
Depending on how quickly you want to save all those gs, you’ll probably have to give up everything fun for a solid year or two.
You may have to move back to your childhood bedroom and feel increasing amounts of weirdness whenever your partner stays over as Fred, your mangled teddy of yore, eyes you from the top of your wardrobe.
How could you abandon poor Fred?
He’s seen things.
Knows things.
Being serious for a sec: saving for a deposit is hard.
It’s going to be one of the hardest things you’ll do, but it’ll be so, so worth it.
Set a budget (make sure it’s at least semi-realistic) and stick to it.
There’s nothing else to this step beyond a slog and many nights spent sitting in watching Gogglebox with your folks.
2. How Much Can You Borrow as a First-Time Buyer?
How much you can borrow is straightforward and based on a multiple of your income.
Generally, you can borrow up to 3.5 times your gross annual income.
This is a standard rule the Central Bank of Ireland sets to prevent excessive borrowing.
For example, if you earn €50,000 a year, you might be eligible for a mortgage up to €175,000.
For couples, let’s say you and your partner make a combined salary of €100,000.
You can borrow up to €350,000.
If you secure an exemption, you’ll be able to borrow up to about 4.5 times your income.
Whoop.
It’s also a good idea to pop into a lender or mortgage broker to have a chat.
Don’t worry: you won’t have to sell your soul to a lifetime of debt.
At least not yet.
3. How Much Can You Afford?
It’s all well and good getting a mortgage of 3.5 times your income but can you afford the repayments?
Affordability and stress testing are crucial aspects of the mortgage application process.
Basically they prevent the bank from being too flash with the cash ensuring borrowers can manage their loan repayments both now and in the future, even if the economy hits the skids.
Here’s a closer look at each:
Affordability Assessment
This is when the bank looks at how much money you make and what you spend each month to figure out how much you can afford to pay for a house each month.
They make sure that after you pay for your mortgage, you still have enough money left for other needs like groceries, bills, and day to day expenses.
Stress Testing
Stress testing is like a “what-if” scenario.
The bank checks if you can still afford your mortgage if interest rates go up, making monthly payments higher.
They want to make sure you can handle your mortgage payments even if things get a bit rough financially.
4. Get Your Paperwork in Order
Now you’re properly into the swing of it, it’s time to get your bits in order.
Most banks will require similar documents: proof of income, proof of address, tax documents, etc.
Check your lender’s website so you know what you need.
If you’re reading this and you’re very early into the process, it’s a good idea to start paying your rent and any outgoings by direct debit so that you’ve got a clear paper trail of incomings and outgoings.
If you have a loan, you’ll probably want to pay that off first if it’s going to affect your affordability numbers.
And if you like a flutter – make sure you do it in cash 😉
5. Have a Proper Look at Prospective Homes
Depending on your expectations, this is where it starts to get fun and/or terrible.
If you plan on buying a gorgeous gaff on a small enough mortgage, you may have to move to Leitrim.
You’ll get a stunning house for two hundred grand, but you’ll be in Leitrim.
Swings and roundabouts.
There’s nothing wrong with Leitrim, by the way; it’s just a bit of a commute from Dublin.
Daft.ie is always a good shout, as is the Property Price Register, which lists the sale price of houses in the last few years.
You can get a good idea of a realistic location for your budget.
At this point, you may have to get your ma to say a prayer to St. Anthony to find you a house.
When you finish praying, another good tip is to sign up with estate agents directly. You’ll get first dibs on news about new builds or homes coming to the market.
Also, if you’re looking for a massive gaff, some don’t come on the market.
These “off market” houses are hush-hush so you need to have a word with the estate agent to see if you even qualify to have a nose at them.
It’s a reactive market, so be prepared to move fast. (It’s why getting Approval in Principle is so important.)
While you’re at it, calculate what you will need to spend on the house to get it up to scratch. Rewiring, reflooring, and plastering can all add up.
6. Get Approval in Principle
Approval, in Principle, essentially is ‘pre-approval.
It’s like your bank saying, “Yes, we will give you a mortgage, but only for a specific amount under your current circumstances, within a certain amount of time, and assuming all your bits and pieces check out.”
7. Start Sorting the Legal Bits
Around now, you’ll want to find a solicitor who’ll deal with the conveyancing – the legal-y bit of transferring property ownership.
As soon as you make an offer and it’s been accepted (you’d be surprised by how fast that part happens), the seller will want your solicitor’s information, so have that in your back pocket ready.
Read This| Does your sale contract have a Loan Clause?
And This | How to Find a Good Solicitor for a House Purchase in Ireland
8. Make an offer
Exciting.
But don’t get carried away.
Your offer should be subject to contract and survey: your solicitor will need to check that everything works out legally, while you’ll need to hire a surveyor (Noel is a good guy) to make sure the house doesn’t have any structural skeletons.
In short, check everything and make sure you know what you’re getting into.
And don’t be afraid to have a poke around the neighbourhood or to talk to the neighbours.
The last thing you want to do is to move into a nice house only to find out that a gang of feral children descend on the area once a week, carrying shotguns and wearing masks like something out of The Purge.
Once you go ‘sale agreed,’ you’ll have to pay a booking deposit, which is refundable up until the contracts are exchanged.
9. Sort Out The Insurance
Around about now, it’s a good idea to sort your Mortgage Protection.
Your friendly neighbourhood broker (me, I mean me) can sort that out for you by comparing all the insurers and finding the best deal (especially if you have a health issue)
You can go with your bank, but that’s not a good idea; it’ll cost you more in the long run.
10. Snag List
If you’re buying a new build (lucky sod; there’ll be no taffeta monstrosities for you to re-decorate), make sure you double-check everything and start a snag list (preferably with help from an architect or engineer).
You’ll give the snag list to the builder, who will sort it.
By the way, if you are doing a self-build, you should read this blog:
What life insurance do you need for a self-build mortgage?
11. Make it Final
Once the vendor accepts your offer, you’ll turn your AIP into a formal loan offer.
Presuming everything is grand with the surveyor’s report and there have been no major malfunctions, you’ll sign the contract and pay the deposit.
You should have your Mortgage Protection activated before you sign contracts.
Once the paperwork is signed off, you’ll collect your keys and get cracking towards moving in.
And then you’ll merrily move into a lifetime of debt owed to the banks.
Great.
No really.
12. Our Home Buyer Diaries
So that ends our First-Time Buyer’s Guide to Buying a House.
I know it’s not easy, but it can be done.
Read Lisa’s story for some inspiration.
If she could buy a house in the middle of a pandemic, you’re laughing!
Home buyer diaries: How Lisa, 30, bought in Dublin during a pandemic
While you’re here, are you looking for the best deal on Mortgage Protection?
Complete this short questionnaire, and I’ll steer you on what you need; it’ll be quicker and easier than doing it yourself.
If you have questions you’d like me to answer first, call me on 05793 20836 for a quick chinwag.
Or schedule a callback here.
Thanks for reading,
Nick