More below-cost properties are likely to come on the market now – so go and get mortgage approval to see how much you can afford, writes JACK FAGAN
THE RECENT sale of apartments in Mullingar at knock-down prices has apparently triggered an upsurge of inquiries about the availability of mortgages for first-time buyers. The expectation is that there will be more bargains available over the coming months, particularly in the greater Dublin area, now that Nama has finally got stuck into the Pandora’s box of impaired loans to developers.
Even before we see what the “bad bank” plans to do with unsold and uncompleted homes on some of these troubled sites, we hear that some of the funding banks are planning to appoint receivers in the hope of recovering as much of their loans as possible. Otherwise they could possibly be waiting for years for Nama to get around to the smaller sites where builders have run out of money and sales.
All this points to the prospect of more below-cost properties becoming available to those who are fortunate enough to be able to get a mortgage. It is almost inconceivable now that over-the-counter mortgages were freely available to almost all comers only two or three years ago. Not any more.
To get on the shortlist with the mortgage providers, applicants must first have a deposit of at least 8 per cent – in other words, a minimum of €16,000 for an apartment costing €200,000, according to Frank Conway of Irish Mortgage Corporation.
And, what’s more, the banks will look for evidence that a large percentage of the deposit was saved via a personal savings account.
Once there is a history of saving, the bank will be more inclined to advance the mortgage in the knowledge that the applicant has an established history of financial discipline.
In the new era of credit restrictions, another mortgage expert, Lorraine Cullen of MMPI, reminds clients that in all probability the lender will go through their current account to get an indication of how they manage their affairs from month to month “so it is important that all current accounts are kept in credit, no overdrafts or referral fees”. She also advises that all personal loans should be paid and up-to-date as missed payments would show up on the records of the Irish Credit Bureau.
Another important consideration is that outstanding personal loans will be taken into consideration when the lender is determining the size of the mortgage to be advanced.
Though many of the banks are continuing to give the impression that they are still open for mortgage business, the reality is quite different.
Some are, indeed, approving mortgages for the best applicants, others are reluctantly offering smaller sums than needed to buy new homes and yet more are simply out of the market altogether.
With selling prices on the floor and most estate agents willing to negotiate the price, first-time buyers are touring sites in ever increasing numbers. However, only a small percentage of them are making firm commitments. A great many viewers are holding back because they believe that prices may fall further while others cannot make a commitment in the absence of mortgage approval.
In some instances buyers who signalled their intention of buying have had to drop out subsequently either because of wage cuts or, worse still, redundancies.
Frank Conway advises first-time buyers to first look for mortgage approval in principle so that they will have an idea how much they can afford to spend. “Do not go out shopping for a property you cannot afford and do not place a deposit on a home until you know you can afford it and you can get mortgage approval.”
Conway tells clients never to disclose how much their mortgage provider has approved for them. “This continues to be a buyer’s market so take your time and negotiate a good price. Also try not to become too emotionally attached to a property – at least don’t let the seller see that you are.”
