Will I be declined a mortgage?

Q

QCI

Guest
I am in the process of applying for a mortgage and am worried that I will be declined.

I am in a secure Government job getting paid weekly. I have a car loan with just over 1k left to pay, I also have just over €300 on my credit card. I understand that I need to pay these off before I send in the documents to the broker, so I do not have any loans when I apply for the mortgage.

However, I have been saving for the deposit through my Credit Union. I was saving more than I could afford to, which has left me overdrawn 3 times on my current account. Since i have no agreed overdraft facility on my current account, I have 3 referral charges in the last 3 months on my account.

I have now reduced the amount I am saving for the mortgage, so I will not be missing another DD, thus not incurring another Referral charge.

Will these referral charges seriously hinder my ability to get a mortgage??
 

What is your current Salary?

How much do you need to borrow?

How much have you saved for deposit and how long did it take you to save it?

Should you get an overdraft facility greed now just to have?

The 3 items you mention seem to be small issues eg loan/crdit card/ refreeral fee

main issue i say is do you have deposit?
 
Hi Feltox,

I am applying jointly with my partner.

Between us we have a deposit of 40k

My current salary is 38k gross. She is self employed for the last 3 years, business is doing well, she opened at the start of the recession and has made a profit year on year so far, between us we earn around 66k per year.

I will not need the overdraft facility now that I have reduced the amount I am saving...i hope!

We are looking at a few houses between 400-450k asking price. Hoping the vendor would reduce to 350-370k. So we hope to be able to get a mortgage of at least 330k........am I hoping for too much!
 
Hi QCI,
You are hoping to get a mortgage for 5 times you joint salary combined which IMHO seems high (this year my partner and I got a mortgage 2.5times joint salary). Even if the bank gives it you need to ask yourself if you are overstretching yourselves? What if someone is out of work? Ok you have a secure job but what if your partner is off work or on maternity in the future or her business dries up, could you cover the mortgage yourself?
I suppose it's a personal choice, we decided to borrow less (we could have got more) and be happy with what that bought us (3 bed semi) and have the security of affording it if 1 person was off work (like you my partner has a secure government job, but I could lose my job who knows) and be able to make repayments and still save some money for a rainy day. Of course not everyone thinks along those lines.
 
I agree with fizzelina. 2.5 times earnings is a sensible mortgage level. Don't rush into buying, as house prices are currently still in a downward direction, and even when they hit bottom, they will not bounce back like stock markets have.
You should not only consider if you can afford the mortgage now, but take into account loss of earnings in the future. Draw out scenarios where taxes increase, your wages are reduced, your partner's business goes through a rough patch, god forbid some medical issues that put you out of work; there are many unforeseen things that can happen, but you can plan for them. You should also not be left with no rainy day fund after you have purchased and furnished the house.
All these things were not taken into account by so many people in the last decade, and they are now paying the price. Don't make the the same mistakes.
 
Hi QCI, If I were you I would pay off the loan and clear the debt before you apply. You are lucky it is a buyers market and you should have a good choice of house to pick from.

There are a few things I would factor in before you make a decision and please I dont want you to think I am being cruel. Buying a house is a huge decision and one that should not be taken lightly, are you and your girlfriend really secure (I dont want you to feel you have to answer this here!!! just think about it.) Unfortunatly I read too often where BF/GF buy house, split up and one of them is left "holding the baby" swamped with debt..
If you guys are secure, when you are buying a place - dont think of now, think of where you would like to be in 5 years (near home/ family etc...) buy the best house you can resonably afford given that there are interest rates you need to factor in.

Take all the time you need, as I said you are in a buyers market (and probably will be for a few years)..
All the best P
 
Hi all,

Thank you for all the replies. There is an awful lot of sense being posted here and TBH, I have thought of all of the above also. 2.5 times our combined salary will not get us a house where we want to live. In fact there is only one property near us going for €199k and to make it liveable you would need to put another 100k into it.

We have thought about it, and have decided to buy a house we really like now, instead of buying any ftb property, and then hoping to upscale in the future. We feel that to buy a cheaper 2 bed terraced now with no parking spot, garden or possibility to extend is of no benefit to us, because as soon as we move in, we would want to move out of it.

So,that is why we hope to get a 3/4 bed detached/ semi D, with room for 2 cars, front and back gardens with possibility to extend. Luckily for us, there are a good few of these around our area now, previously, we could never even dream of living in one of them. Now it is achieveable. We would be happy with this type of property and would have no reason to look to move on. There is 1 that I know we could get fof 340-360k. If they would accept less...id gladly borrow less.

Personally, I will have no lfurther oss of earnings up until 2014. As soon as the moratorium is lifted I will be getting promoted and as a consequence my wages will go up. I also have the option of going overseas for 6/12 mths in the future which will give me a lump sum of 20/30k+. If my partners business fails or she becomes ill, I could cover the mortgage by myself...not indefinately obviously....I could always deliver pizzas for extra cash

Oh and we are in a steady relationship for the past 8 years. We wont be getting engaged/married until we have a house first.

My original question was...will having referral fees on my current account stop me from getting a mortgage?
 

You don't need to pay them off before you apply for a mortgage but they may need to be cleared before you drawdown the mortgage. As they are small loans they may be disregarded by the lenders but better to get rid of them.

The referral fees are the bigger issue, some lenders will decline you because of these. Some will take your explanation into account if it is clear from your statements that you were saving too much. To get the best chance of approval knuckle down for six months, get your current accounts in order i.e not o/d, no referral fees, show a steady stream of savings for the 6 months and most importantly prove that you can afford the projected monthly mortgage repayments (stress tested at 6%). Your savings plus rent should be more than this figure.

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On the fear of your partner being unable to work, does she have income protection in place, as a self employed person she should look into this.
 
You don't need to pay them off before you apply for a mortgage but they may need to be cleared before you drawdown the mortgage. As they are small loans they may be disregarded by the lenders but better to get rid of them.
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It was my understanding that when a bank was calculating what you could pay in erms of a mortgage, they looked at your whole debt. In that if the rules stated that a customer should not be paying more than 25% of their salary on debt repayments, all current loans would be included in that 25%, thus reducing the amount that you would be given. Do bear in mind we got our mortgage 5 years ago and things have changed!
 
Depends on lender, size of loan, overall net disposable income of applicant. If you want the maximum approval then it is better that they are paid off but this does not need to be done before you apply, they would need to be cleared before the lender will issue the mortgage cheque.
 
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