Home Buyers Guide

Chapter 2: Buying a Home During the Credit Crunch

Steps to take straight away:

Protect your Credit Rating

• When you apply for a mortgage or loan, the lender does a credit search to find out if you are a good credit risk.

• This credit search shows all the loans you currently have and any loans you’ve had in the last 5 years.

• You need to make sure you pay every monthly loan obligation on time because if you don’t, it will show up on your credit report. This gives the banks a reason to decline you.

Manage Your Current Account Properly

• Mortgage lenders will also review your current account statements, for the last 6 months (or more).

• They use these accounts to build up a profile of your spending and lifestyle and your potential to repay the loan.

• In particular, they look for any referral fees, charged when you bounce payments or go over your overdraft limit.

Do NOT extent your borrowings

• Mortgage lenders look at your other debts when calculating your borrowing capacity.

• Existing debts reduce the amount you can borrow significantly as loan payments reduce your disposable income.

• For example, a €400 a month car loan could reduce the amount you would qualify for by €65,000.

• Unless it’s unavoidable, it’s best to avoid new borrowings or at least keep them to a minimum.

Save a Deposit

• Save as big a deposit as possible. While some lenders will accept an 8% deposit, you may be approved for a
bigger mortgage or get a better deal if you have a bigger deposit.
• Even if you are going to get a gift of the deposit from your parents, you should still save some money as this shows
your ability to repay the mortgage.
• People who regularly save money are seen as better credit risks than those who don’t.

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