It’s not easy to be a first-time buyer in this day and age. Stricter lending regulations mean that lenders now look for first-time buyers to be in better financial shape than ever before dishing out a mortgage. The process can be overwhelming for those unused to it, but with patience, planning and practical thinking, the obstacles facing you can be manoeuvred to get you on your way to your first dream home.
An immediate hurdle facing many first-time buyers is often the most difficult – paying the deposit. Under Central Bank rules, which changed late last year, first-time buyers are required to have a deposit of 10% of the property’s full value, regardless of the cost. Given the price of houses, particularly in urban areas like Dublin, this could easily reach €25,000 or more.
Saving up for the deposit is an undoubtedly difficult task, and it will require some smart and clever saving. The sum is unlikely to materialise overnight, so think more long-term. Draw up a savings plan to last for at least a year and stick to it. Figure out by how much your monthly bills will have to be cut and then set about altering your lifestyle to accommodate your new spending plan.
And, of course, consult all previous money saving tips on You & Your Money to see if any apply to you and live your life by them. It might be tough, but it’ll be worth it when you finally get that deposit together.
There are several types of lenders available to first-time buyers – commercial banks, mortgage companies, credit unions – and each may quote a different price. It is important then to put in the time and effort to search around and find the best price to suit you.
It might even be best to arrange a mortgage through a broker, who will essentially find a lender for you. They do not lend money directly; rather they arrange the transactions. A broker’s access to a network of lenders may mean that they can find you a better price.
However, brokers are usually paid a fee for their services that may be separate from and in addition to the lender’s fees, so it is best to exercise caution. Shop around for brokers as you would a loan provider, and ask each broker how they will be compensated, so that you can accurately compare the different prices they give you.
Don’t be afraid to negotiate. On any given day, lenders and brokers may offer different prices for the same mortgage terms to different customers, so see what you can do. If you’ve come across a better deal somewhere else, inform the lender or broker. Perhaps they’ll cut you a better deal to ensure your custom. Be wary and ensure that the lender or broker is not agreeing to lower one fee while raising another. All these interactions require a level head on your part to ensure the best outcome.
Once you’re happy with the new, negotiated price, you may want to obtain a written lock-in. A lock-in is a guarantee from a mortgage lender that they will give a loan applicant a certain interest rate, at a certain price, for a specific time period. Lock-ins can protect you from rate increases while your loan is being processed, but if rates fall, you could end up with a less-favourable rate. If that happens, try to negotiate a compromise with the lender or broker.