One of the most common issues, when we consider buying a home, is whether the bank will provide financing. We must bear in mind that banks currently grant mortgages demanding more stringent requirements than in times of the housing bubble.
When will the bank approve our application?
If we want to know which profile is the best one to grant us a mortgage, the most important thing is to meet the following requirements:
- To enjoy job stability: we must show that we have a good capacity to pay, that we have a stable employment situation and an indefinite contract. In addition, our income must be equal to or greater than € 2,000. The Bank of Spain recommends not to allocate more than 35% of our income to the payment of the mortgage.
We can use the mortgage simulator with which we can know what the fee will be to pay depending on our payroll.
- Have savings: the bank will lend us money if we have an amount of money that represents 35% of the value of the home. A 20% will pay the money that the bank does not finance us and the other 15% will be used to pay the opening costs.
- Have a good credit history: if we have outstanding debts we will have very difficult to grant the mortgage since we will not show a guarantee of payment. In addition, if we have not made any payment and appear on some list of defaulters as ASNEF, we must seek financing through private capital.
- Having other assets: if we own some property we will always show greater solvency because they can prove that we can face a large payment such as the mortgage.
- Have a possible guarantor: the bank may ask us to put up a guarantor because it considers that there may be some type of risk. However, we must know before signing that including an endorsement has very serious consequences, since in case of default this will respond with your present and future assets.
What mortgage should we choose?
When deciding on a mortgage, we must look at the one that best fits our economic profile. In order to determine if we can answer these six questions:
- Do I want a fixed or variable mortgage? With a fixed-rate mortgage, we will make sure that the payment of the installment will not change in the life of the mortgage loan. However, some entities will require us to be more linked than in variable mortgages and the fee may be higher because the terms tend to be shorter. If we decide to opt for a mortgage referenced to Euribor, we will enjoy reduced rates when this index is low, but we will start to pay more when it increases its value.
- How long are we going to pay the debt? We must decide what is the repayment term of our mortgage. Currently, there are banks that offer to finance for up to 40 years. We must adopt the term depending on our income since with a variable mortgage the fees will be lower than with a fixed one.
- What amount will we need? Taking into account the savings and income we have to determine what part of the housing payment we want the bank to finance us. Nowadays, entities offer a maximum of 80% of the lowest value between the purchase and sale valuation. However, it is possible to contract a mortgage loan financed at 100% if we request a mortgage for bank floors.
- What link do I need? To get an interest under the bank will ask us to hire a series of products, in this case, it is important to know which are necessary and we want to pay, because it may be that the bank requires us a pension plan that we had never raised.
- Do I plan to amortize the mortgage in the future? If so, we must ensure before signing our contract that this does not include a commission for early repayment, otherwise we must pay for it. In addition, we have to look at hiring a mortgage that is free of commissions or that has the least possible.
- Do I need to pay the fee in a special way? In the case that we need to request a deficiency at the beginning of the loan to be able to face other payments (works, furniture purchase, etc.) or if we want to pay the fee on a specific day of the month, we must make sure that our Bank is flexible.