Anybody struggling to get on to the housing ladder for the first time will be more than aware of the financial barriers that lenders will place in their way before advancing a mortgage.
Strict regulation of mortgage lending means that only those would-be borrowers who can provide proof of their ability to repay will be given loan approval. It is a basic principle and an extremely important one. After all, allowing people to borrow without limits could lead to dangerous levels of credit that could destabilise the financial system. Defaults and repossessions would be commonplace and banks would be collapsing, putting customers' savings in danger.
It would be a bleak vista, and one which any sensible regulator (in our case the Irish Financial Services Regulatory Authority) would seek to avoid.
It is alarming, therefore, to read that a small number of mortgage applicants have been submitting fraudulent information to back up their mortgage applications. Last week's Sunday Tribune reported that the Garda are actively investigating 30 cases of possible mortgage fraud involving forged documents that purport to show applicants earnings more than they do in reality.
A further 70 to 80 cases of potential fraud are under consideration, according to the report. Criminal gangs were identified as the most likely source of the documents, with P60s reportedly on sale for about €100 a pop. A nice little business, it seems.
Tales such as this represent the worst nightmare of mortgage lenders, who are charged with ensuring that every penny they lend is justified. It is for this reason that they ask mortgage applicants to shower them with documentation when making a mortgage application. So heavy is this shower that the wise mortgage applicant will start to gather it together well in advance of popping in to see their mortgage broker or lender.
The first, and most important, document will be the applicant's most recent P60. Employers will send this form to their staff each January to confirm how much they earned and how much tax they paid in the previous year. This document will provide the basis of any mortgage decision and is of central significance in any application. Supporting documentation will also be required and could provide the "swing" factor to push the decision in an applicant's favour.
Top of the list here will be recent payslips. Mortgage companies usually ask for payslips for the previous three months but it will always be a good idea for the applicant to keep earlier records. These will usually be accompanied by a form which must be signed by the applicant's employer to prove that they are in the same job and are earning as much as they say. Self-employed people can fulfil this requirement by providing audited accounts for the past few years.
All applicants must then gather together different forms of identification to ensure that the support documents match the person seeking the mortgage. Usually, some form of photo ID, like a passport, and a utility bill will suffice.
The applicant must also provide a statement of all loans they already have, outlining how much they owe. Evidence of savings will also be required, with some lenders asking for copies of bank statements for the past six months.
Once you have all of this bag, you're ready to take the plunge. Just keep it legal.
