Getting a mortgage and the costs involved in buying a home

Buying a home can be a challenging experience.

There is a lot to think about - from calculating what you can afford, to learning about the different Government schemes, to budgeting for the additional costs you may not have known about.

Understanding what to expect in advance can help make the entire process much simpler.

There are typically three ways for you to buy a home:

Cash buyer – this is someone who does not need a mortgage and who can prove to the estate agent/vendor with a letter from the bank that they have enough money to make the purchase.

Subject to sale – this is someone who has a property to sell and will be using the funds from the sale to buy another property.

Subject to finance – this is someone who has mortgage approval "in principle" from their lender. People in this group will still need to get formal approval from the mortgage provider before they can sign the contract for sale.

If you are not a cash buyer and are instead choosing the mortgage approach, you need to figure out how much you can afford in monthly repayments.

The Competition and Consumer Protection Commission(CCPC) has a mortgage calculator that shows what your monthly repayments will be with each provider depending on the amount you borrow, how long the mortgage will last and the interest rate. You also need to consider how much of a mortgage the lender might offer you.

If you are a first-time buyer, you may be able to borrow up to 4 times your gross annual income. If this isn’t your first purchase, you may be able to borrow up to 3.5 times your gross annual income.

A 90% limit – also know as Loan to Value - will generally apply to the mortgage you can get when buying a property that will be your primary home. This means you will usually need to fund a minimum of 10% of the purchase price plus stamp duty and other costs from your own resources. See centralbank.ie for current rates. But, if you are buying a property for investment purposes, then the Loan to Value rate is 70%.

There are many other considerations during this stage of the process, such as whether you should apply for a fixed or variable interest rate mortgage, the amount you should try to borrow and the number of years to get the mortgage for.

Some buyers will use a mortgage broker who will offer advice, collect all the necessary documentation and work with the buyer in dealing with mortgage providers. The centralbank.ie has more information on brokers.

The lender will want to make sure that you will be able to meet your mortgage repayments and will ask to see documents to support your application.

Normally they will insist on you being in permanent or regular employment with a steady income and that you have completed your probationary period in work.

They will want to see a history of regular savings and that you have made all your regular payments on time.

And they will ask to see previous payslips (e.g. for the past three months), previous current account statements (e.g. for the past six months), savings account statements for the same or similar period, loan account statements for existing loans going back 12 months and, finally, a recent Employment Detail Summary (available through Revenue here).