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Before you get your heart set on a house, you need to figure out how much you can afford. The best way to do that is to get a mortgage pre-approval. While getting pre-approved is not required, we highly recommend it as it will make your home buying process much easier.
Ability to negotiate a price that fits within your budget. Locks in an interest rate for 120 days. More appealing to sellers. Faster closing period. To get your mortgage pre-approval, one of our lending associates will evaluate your finances to determine the size of the mortgage you can manage (it’s all about the numbers).
Now you can be pre-approved, search for a home, switch to Scotiabank and get mortgage approval all in one place, all online. 1 So applying for a mortgage is now faster and easier than the usual route.
It also applies to once-off self-build homes. It is a rebate of income tax paid over the previous 4 years. It will run until the end of 2022. Mortgage approval Commercial lenders (banks) offer a range of mortgage rates and products. Before starting to look for a home, you should check with potential lenders to get a statement of how much they are prepared to lend you.
Getting approval in principle will indicate what price range you can consider when looking for somewhere to buy. Learn more. However, approval in principle doesn’t mean that the lender has approved a mortgage and agreed to lend you this amount. The official mortgage approval is contained in a letter of offer, which the lender will only issue when it is fully satisfied with certain matters, including a valuation of the property you are buying.
These regulations were brought in by the Central Bank in 2015 and have been amended a number of times. The regulations include loan-to-income (LTI) and loan-to-value (LTV) limits. They also outline the flexibility that lenders have to make exceptions to these limits. These are all described in detail below. These limits apply to most housing loans including equity release and top-up on an existing mortgage.
How the limits work There are 2 types of limit: is based on the ratio of the size of the loan to the value of the home you want to buy is based on ratio of the size of the loan to the income(s) of the borrower(s) In general, you will have to meet both of these limits for your mortgage to meet the Central Bank’s requirements (Get the latest mortgage news).
Lender flexibility on LTI limit Under the Central Bank rules lenders have the flexibility to exceed the LTI limit of 3. 5 times income in: Up to 20% of the value of mortgages to first-time buyers Up to 10% of the value of mortgages to second and subsequent buyers Loan-to-value limit (LTV) There are different LTV limits for different categories of buyer.
If you are a , a 90% LTV limit applies on the full value of the property. This means you will need a 10% deposit for your house or apartment. This LTV limit has applied since 1 January 2017. For , there is a limit of 80% of LTV on new mortgage lending, whatever the value of the property, so you will need a deposit of 20% of the total purchase price.
The LTV limits do not apply to applying for a mortgage for a new property. However, lenders may still opt to apply stricter lending standards, based on their assessment of each case. The valuation of the property must have been carried out no later than 4 months before the date of the mortgage agreement.
Assessing a mortgage offer It is very important for you to be satisfied that the mortgage is affordable from your point of view and that it is sustainable – you need to be able to keep up the repayments over the lifetime of the mortgage. Information about the loan offer Your lender must provide you with specific details about the mortgage offer including: How long the offer will be valid for Contact details of the lender or their representative Main features of the loan, including potential risks Type and duration of credit Full details of borrowing rate(s) and when and how they may be revised, if applicable Total amount that you will pay over the lifetime of the mortgage This information should be set out in a European Standardised Information Sheet (ESIS).
For a full specification of the ESIS and instructions on what it must contain, see Schedule 2 of the Regulations. You can use the information in the ESIS and other sources to assess your mortgage offer. Other sources of information Information on the various types of mortgage is available on , along with a set of mortgage calculators that you can use to work out your monthly repayments and the effects of a rate change.
You can use these budgeting calculators as a starting point. Financial advice You may want to get financial advice. The Competition and Consumer Protection Commission (CCPC) has information about the different types of finacial adviser that are available, as well as the questions to ask and steps to take when shopping around for financial advice.
Even a small variation in interest rates can have a large effect on the overall cost of your mortgage. You can use this mortgage rate calculator to assess the impact of changes in interest rates on your repayments. Can I realistically afford to keep up the monthly repayments if my income falls or my outgoings increase? You need to assess your continuing ability to repay as circumstances change over time.
You should keep all correspondence and documentation from your lender in a safe place, as well as documents relating to insurance on your mortgage, house and contents. Learn more. It is very important to keep up your mortgage repayments. If you don’t, your credit history will be affected and your home will be at risk.
Prospective lenders will use your three-digit credit score to determine your likeliness to pay off future debt (such as the mortgage you want to apply for). If you don’t have a good credit score, the lender may refuse to approve your mortgage, or decide to approve it for a lower amount, and/or a higher interest rate.
The pre-approval process will determine the maximum amount a potential lender will qualify you to borrow. Getting a more realistic expectation of which homes you can afford Being able to estimate your mortgage payment, so you can budget your cash flow accordingly Identification (usually two pieces of government-issued identification with your photo) Current pay stub/proof of employment, along with a letter from your school board (to help substantiate your employment/income) Recent financial statements (to show you can cover down payment and closing costs) List of assets (vehicles, investments, etc.) and liabilities (credit card balances, car/student loans, lines of credit, etc.) Completed Credit Application “How long is the pre-approval good for?” “What information is included in the pre-approval?” “Will the pre-approval list conditions I may need to meet? When will I need to meet those conditions?” “Can the pre-approval be extended? A pre-approval does not guarantee that you will get the mortgage loan Once you have a specific home in mind, the lender will want to verify that the property meets certain standards (such as the market value or condition of the home) before approving your loan If certain standards aren’t met, the lender could decide to refuse your mortgage application (regardless of whether you were pre-approved for a certain amount) Mortgage lenders use two financial formulas when determining how much mortgage to approve you for: This is the percentage of your gross income before deductions (such as income tax) that would be required to cover home-related costs such as mortgage payments, property taxes, heating, and condo fees.
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