Published on April 26th, 2016 | by Martin Clancy
Buying your first home
With housing stock at a nine-year low as reported in the Daft Report, it’s a competitive market for buyers. With this in mind, making sure you are organised is key.
Here are our 5 steps to buying your first home.
- How much can you afford?
The first step to take is to understand how much you can borrow. From February 11th 2015, the Central Bank of Ireland’s new regulations around mortgages came into effect. The measures introduced proportionate limits for loan to value and loan to income measurements.
What are they?
- In the majority of mortgage applications for first-time buyers, the maximum amount you may borrow is 3.5 times your gross annual income. This is a good rule of thumb to use to start your property search. The reality is that all mortgage applications are dealt with on a case-by-case basis and in exceptional circumstances, a bank may be in a position to lend more.
- In terms of a deposit, for a property with a purchase price of €220,000, first-time buyers will need to supply a minimum 10% deposit and 20% on the excess over €220,000. For example if you would like to buy a house worth €250,000, your lender will lend you €222,000. This figure is made up of 90% of €220,000 plus 80% of €30,000 the excess over the threshold amount of €220,000). You will have to fund the remaining.
You can find our more on the Consumer Help website.
Make sure to shop around the various lenders (banks, building societies, brokers, credit unions etc.) for the mortgage product that suits you best.
When successful with a mortgage application, you will be given “Approval in Principle”. This is how much the lending institution is prepared to give you (in principle – i.e. terms and conditions apply). You now know how much you can afford but you should take into account the costs of buying a home before you go house hunting. Normally, “Approval in Principle” lasts 6 months from confirmation.
As part of this process you should also factor in other costs when buying your first home:
- Valuation Fees, usually €100 to €150 (excl. VAT). This pays for a professional valuer to give your lender an estimate of a property’s market value.
- Legal Fees, you need a solicitor to look after the legal aspects of your mortgage. Fees vary, and may be either a percentage of your mortgage, or a flat fee.
- Stamp Duty, read our Stamp Duty explained blog post.
- Surveyor Fees, to look over the house for you before you make the purchase.
- Property Tax, the amount of local property tax due depends on the value declared for the property and the local property rate applying to your property for the year that you buy.
- Mortgage Protection, you may be required to take this out in case you lose your job and are unable to keep up the mortgage repayments on your home.
- Home Insurance, to cover your home in the case of any type of damage.
Bear in mind that some of these fees may be due early in the process e.g. valuation and surveyor fees while other fees will be due later in the process upon closing the sale e.g. stamp duty, solicitor fees. It’s a good idea as a first-time buyer to ensure you’ve already budgeted for these additional expenses.
Top Tip Ask the estate agents to recommend nearby up-and-coming areas. You might get a little bit more for your money if your preferred areas are a little out of your reach financially. Check out our Daft.ie Estate Agent Hub to discover Estate Agents in your area.
- What are you looking for in your first home?
When you have an idea of how much you can afford it is time to start looking properly. By clicking here you can tailor your search on Daft.ie to meet your needs. Are you looking for a detached house? Terraced? On the LUAS? With Advanced Search you can get tailored results.
You should also set up a few email alerts using your ideal criteria like local area, maximum asking price, property type etc. so that you receive property ads that meet your match into your email inbox as soon as they are posted to Daft.ie.
Once you have selected the type of home you are interested in; there are two methods by which property is commonly sold; that you should be aware of when buying your first-home; private-treaty & public auction.
If a property is for sale by private treaty. You simply make a verbal offer to the seller or estate agent. If the seller is happy with your offer you get the property. If there are a number of people making offers for the same property it is up to the seller to decide who wins – this is usually the person with the highest offer. The benefit to the purchaser in a private-treaty sale is that the offer made is not legally binding and you can withdraw your offer (you may lose any deposit made). If your offer is accepted, you can then finalise the details with your agent.
- Public Auction
In an auction the person with the highest bid wins. A bid at an auction is legally binding and you are unable to withdraw your offer. Generally you are required to pay your booking deposit immediately after a successful bid. Due to the legally binding nature of an auction it is necessary to have a Letter of Offer (i.e. full mortgage approval) from your lender before bidding.
Once your bid or offer is accepted and your lender has given you a Letter of Offer all that is left is the signing of the contracts.
What happens once you go “Sale agreed”?
If your offer is accepted it is usually called ‘sale agreed’ and you will need to pay a booking deposit to the estate agent. Booking deposits vary – they can be a specific amount such as €5,000, or a small percentage of the offer you have made.
The booking deposit is refundable up until you sign the contracts and enter a legally binding agreement. Paying your booking deposit is a strong signal to the estate agent that you intend to buy the property and will usually mean that the home won’t be put on the market again for three to four weeks.
Once your offer is accepted, the estate agent will prepare a document of sale details and send this to the seller’s solicitor and to your solicitor. This document contains details of the price, conditions of the sale, the estimated ‘closing date’ – the day you will be given the keys of the property-, and the names and addresses of all those involved in the sale.
Once the seller’s solicitor receives the sale details from the estate agent they will send the contracts for the sale of the property, along with a copy of the Title Deeds of the property to your solicitor. Title deeds are legal documents showing the ownership of a particular property. Each time the ownership changes a new deed is drawn up to show the change.
- Signing Contracts
You’ll need a solicitor to help you with buying your first home and the best way to choose one is to get some personal recommendations, so ask friends and family.
Your solicitor will:
- Carry out the conveyancing – the legal process of transferring a property from one person to another
- Investigate the legal aspects of the property – the boundaries and what’s included in the sale
- Carry out a ‘search’ – to find anything which could undermine the value of your property
- Advise on and handle the offer you make to the sellers
- Make sure the sale is completed once contracts are exchanged Most solicitors will charge a fee which is usually a percentage of the agreed sale price. So it is useful to know the fee in advance and whether it includes Land Registry Fees and local searches.
On confirmation of your solicitor, your application will be submitted for review. On approval, you and your solicitor will be sent the mortgage offer documents for your consideration and signature.
Top Tip If something isn’t completely clear, don’t be afraid to ask. Many of the documents you will be asked to read and sign will be written in unfamiliar legal language. Your solicitor will be happy to explain the ins and outs in plain terms.
- Exchange Contracts
At this point you are quite close to buying your first-home.
Providing there are no problems with the survey, the solicitors on both sides will draw up formal contracts for you and the seller to sign. These are legally binding so make sure you’re ready to go ahead.
On the day agreed by both parties the mortgage funds will be released to your solicitor who in turn transfers them to the seller’s solicitor.
- Move in
It’s exciting but can be stressful, so booking a professional removal firm to help might be a good idea – especially if you have a lot of stuff! And don’t forget lots of people besides friends and family need to know your new address, so:
- Contact the electricity, gas and telephone companies in advance so you’re connected from the start
- Let your bank, building society and credit card companies know
- Make sure your cable or satellite company knows when you’re moving
- Tell your car insurance company and your local Motor Tax Office – it may affect your payments
- Ask An Post to redirect your mail.
Remember, your first mortgage payment should leave your account about a month after your mortgage purchase has been completed.
And, finally, enjoy your new home!
Top tip: Read our packing for a move blog post for some handy advice on making it that little bit easier when buying your first home.