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| Home >> Latest News |
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| Buying your first home |
1. How much can you afford?
The first step in buying a home is figuring out how much you can afford. The amount that you can borrow will vary from institution to institution, however a good rule of thumb is about 4-5 times your salary. The amount you can borrow is influenced by your credit rating and any existing debts that you may have. Most lending institutions will not let you borrow more than 92% of the value of the property. So you should have some amount of savings prior to loan application. Recently, some institutions have started 100% mortgages but the terms and conditions are quite strict.
You should shop around the different banks, building societies, brokers and credit unions 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.
2. Cost of buying a home
You should be aware that there are many costs involved in buying a home other than the obvious.
- Stamp Duty
You may be liable for stamp duty. Stamp duty is a tax on the processing of the documents that relate to buying and selling property. The good news is that there are reduced rates and sometimes complete exemptions for first-time-buyers. The bad news is that stamp duty liabilities can be as high as 9% of the property price so you should take the time to read about stamp duty.
- Legal Fees
There is no standard charge for conveyancing (the term for the legal process of buying and selling property) but you should be prepared to set aside around 1% of the property price for your solicitor. Recently, due to the high price of property, some solicitors have started offering flat rate conveyancy. It's worth shopping around to get a deal that suits you best.
- Valuation Report
Your lending institution will probably require a valuation report of the property you intend to purchase. This is needed as proof that the property you are buying is worth the money you are paying for it (This information is equally valuable to you). A valuation should cost no more than €150.
- Home Insurance & Life Assurance
Most lending institutions will require you to take home insurance on your property in case of fire or other damage. Further, you may also be required to have a life assurance policy with mortgage protection.
3. Go house hunting...
The best way of finding a property suitable for a first-time-buyer is right here on Daft but don't take our word for it - check out the newspapers, other websites etc. and prove this for yourself.
When you find a home that interests you, you need to make an offer. There are two methods by which property is commonly sold: private-treaty & public auction.
- Private-Treaty
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 loose any deposit made). If your offer is accepted, you can then finalise the details with your lender who when satisfied they will give you a Letter of Offer. This letter is a formal agreement to lend you a particular amount.
- 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 you're lender has given you a Letter of Offer all that is left is the signing of the contracts.
4. Signing Contracts
Your solicitor will submit your offer officially in writing and will then perform some background checks (Searches) to confirm that everything is in order with the property & seller before you proceed. Meanwhile the seller's solicitor will draw up a contract for you to sign. If not already paid, a deposit will be due. A date will be agreed to complete the sale. Once your lender gives you the final cheque, your solicitor will make the final payment. You will be given the keys and will become the proud owner of your first home.
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