If you are thinking about purchasing a house but unsure if what is involved, here is a breakdown of the mortgage application process. All cases and lenders vary so we have not put any timeline on the various stages.
1. Approval in Principle (AIP)
Once you have gathered all of the documents required to apply for a mortgage your broker will package an application and submit it for AIP. This is the first stage in the process and is the lender’s assurance that assuming there are no material changes in your circumstances by the time of formal application, they will provide a loan for the agreed amount in respect of a specific property. You do not have to have a property picked at this first stage. AIP generally lasts for 6 months.
There can be a lot of back and forth with the lender during this stage as it is during the approval process that they query everything, making sure that nothing which could negatively affect an applicant’s ability to repay a mortgage, goes unnoticed.
By having your AIP sorted before you start shopping it means that you will be ready to go when you find the right property and this could give you an advantage over other bidders.
Once you secure a property you will need to get a valuation on the property done. This usually costs about €150 but varies depending on the lender. Assuming the valuation is in order and that you have met the conditions outlined in the AIP (there are always a few but they are generally straight forward), you will then be in a position to progress to a loan offer. You will also need to appoint a solicitor before progressing to a loan offer.
2. Loan Offer
Once the Loan Offer issues, there will be a few more conditions to be met but, again, these are usually straight forward. For example, organise life insurance and home insurance. All conditions must be satisfied prior to draw-down.
An original of the loan offer will be sent to your solicitor and you will be required to sign the offer with them. Once all the legal side of things are sorted and all conditions outlined on the offer have been met, your solicitor will be able to request for the funds to be drawn-down.
3. Draw-down of funds
Once the solicitor requests drawdown of the loan, funds will be issued within a few days. Once the mortgage is drawn-down your repayments will begin the following month.
Other Costs to be aware of
There are a few extra costs that you need to keep in mind:
- Stamp duty – 1% of the purchase price
- Valuation Report on the property must be organised – approx €150
- Engineer’s survey – it is recommended to have a survey done, especially if you are purchasing an older house. It isn’t a lender requirement but can give the buyer peace of mind that there is nothing structurally wrong with the house (fees vary).
- Solicitor Fees – vary depending on the solicitor, cost of the house, complexity etc, but allow for 1% of the purchase price plus VAT
- Life Insurance – cost depends on mortgage amount and term, age, health status etc.
- Home Insurance – cost depends on house value, location etc.
Mortgage brokers know exactly what lenders are looking for. Once they have the above information they can help package an application and relieve the client the stress of dealing with the lender directly.