Unlocking Your Dream Home: Essential Tips for Contractors Navigating the Mortgage Process

Discovering your dream home is an exciting adventure, filled with anticipation and the promise of a new chapter. However, amidst the excitement can lie the mortgage application process. It can often feel like a maze of confusing terms and daunting requirements, leaving many feeling overwhelmed.

But fear not! If you're a contractor looking to purchase a home in Ireland in 2024, there's good news. Understanding the essentials of the mortgage process can significantly simplify your journey. And for our Icon Accounting clients and community, there's better news! Through our longstanding partnership with Humdinger Mortgages, specialists in contractor mortgages, you have access to expert guidance tailored to your unique needs.

In this blog, we'll provide a comprehensive overview of everything you need to consider to make your dream of homeownership a reality. From essential criteria to financial preparation, we've got you covered every step of the way. So let's dive in and ensure you're fully equipped to navigate the mortgage process with ease and confidence!

Can you meet the universal criteria to apply for a mortgage?

Before delving into specifics, it's crucial to recognize the universal criteria applicable to all mortgage applicants, regardless of employment status. These include:

Deposit: Every borrower must contribute a deposit towards the property's cost, which is 10% for first-time buyers (FTBs) and 20% for non-first-time buyers (NFTBs), unless an exemption is granted.

Loan to Income: FTBs can borrow up to four times their gross annual income, or a combined amount in joint applications, while NFTBs can borrow up to 3.5 times their gross annual income.

Repayment Capacity: The Banks will want to see that you have clearly demonstrated a capacity to repay the mortgage you have applied for. They stress test this repayment by assuming a 2% increase in the mortgage interest rate and will want to see that you have been able to live without the amount for at least the previous 6 months. You can demonstrate an ability to repay by showing a strong savings history and strong payment history, i.e. ability to pay a specified rent each month.

Credit History: Poor credit history can influence your mortgage approval; Mortgages are underwritten based on your previous credit history. If you have had any issues with this in the past you will find it difficult to navigate past this when it comes to getting approval.

Do you have a solid work history?

In addition to following the normal criteria, it's important for contractors to have a reliable and consistent work history. It's crucial to recognize that lenders evaluate your reliability and consistency within a defined timeframe. Demonstrating a consistent work record not only signifies a stable income source but also reassures lenders of your capability to fulfil financial obligations.

It's worth noting that banks require a minimum of 12 months of contracts to be in place for contractors to be eligible for a mortgage.

Can you show regular savings?

Lenders will require evidence of savings. It's advisable to start saving early and regularly depositing funds into a savings account to establish a routine. Additionally, consider aiming for a larger down payment if feasible. Increasing your deposit size expands the range of mortgage options available to you, potentially enabling you to secure your dream home.

Do you live within your means and can show a strong credit history?

Are you financially responsible and can demonstrate a solid credit history? Maintaining good credit is essential for mortgage eligibility. Review your credit report for inaccuracies and ensure there are no outstanding direct debits or standing orders on your statements. If you have an overdraft, examine your bank statements for the past six months to confirm you're not consistently dipping into it. Clearing any existing debts before applying for a mortgage is advisable to strengthen your financial position.

Do you have your documentation in order?

Remember, lenders require proof of financial stability, so it's essential to gather all necessary paperwork and ensure your finances are well-organized. If you're self-employed, you'll need to present two years of certified accounts. For Icon Accounting clients seeking a mortgage, we can assist by providing the following documentation:

• Certificates of Salary and 3-6 months’ payslips
• A letter confirming up-to-date tax payments with a Tax Clearance Certificate
• Copies of relevant tax returns for the past three years
• Financial statements and bank statements for your limited/umbrella company

Have you taken into account the extra expenses associated with the mortgage process?

It's important to factor in costs such as valuation fees and solicitor fees. Take the time to shop around and research the average costs involved.

Have you talked to a mortgage broker?

Navigating these complexities is where a knowledgeable mortgage broker becomes invaluable. And equally important, finding a broker who understands contracting is essential. Humdinger Mortgages, an award-winning mortgage brokerage, specializes in assisting contractors. They will provide you with a dedicated mortgage advisor who will be with you every step of the way. They will calculate exactly how much you can borrow, how much everything will cost, and walk you through the entire purchasing process from start to finish.

Begin your journey to homeownership with confidence. Contact Humdinger Mortgages today at hello@humdingermortgages.ie to start your seamless mortgage journey, customized to meet the unique needs of contractors.