One of the concerns when it comes to buying a property is whether or not you will be granted a mortgage for the house of your dreams. In order for you to know everything you need, we have 5 essential requirements for this property to be yours.
Ten years have passed since the fall of Lehman Brothers, the American bank that caused, along with other agents and factors such as the lack of economic regulation or excessive speculation, the Great Recession that hit the world from 2007 and 2008 to the present day.
Since then, the financial situation has changed a great deal, but what has not changed is the need for future homebuyers to obtain mortgages for their purchase.
Banks are now more closely watched than they were ten years ago, and the mortgage firm is experiencing an upward trend thanks to the confidence that new clients are depositing in financial institutions, which now take much more into account the risk of operations.
The days of banks granting mortgages without too much consideration are over. Now to get a mortgage you have to comply with a series of requirements and demands that turn back a large part of the buyers.
But as you know, information is power and that is why we are going to tell you all the necessary requirements today to get a mortgage:
What do I need to get a mortgage?
First, and before entering into financial matters, the bank will need the following documents to grant a mortgage loan:
- NIF or NIE
- Official summary of working life
- Most recent personal income tax statement
- Receipts from other active loans
- Deeds of other properties in possession
- Latest bank statements
Documentation for a selected property:
- Deposit contract for the house to be purchased
- Information about the property
- Deed of the property (if the sales contract has already been signed)
Work related documentation:
- Employment contract
- Copy of the last payslips
- Annual VAT and personal income tax return (self-employed). Also quarterly payments and fractional returns.
- Proof of payment of the last instalments of self-employed persons.
- Proof of Social Security payments.
Having these documents available as soon as possible will serve to shorten the deadlines, although the requirements and methodologies are different in each entity. In any case, the presentation of these documents is intended to ensure the economic stability of the candidate, so it is advisable to submit to the bank any other evidence that may help to gain their confidence and even improve the conditions of the mortgage.
Possessing money saved
As detailed in the entry on the different types of mortgage, currently banks do not usually provide financing exceeding 80% of the value of the home. Moreover, this percentage may be lower in situations such as the purchase of a second property. It would only be possible to obtain a mortgage close to 100% with very solvent guarantors or double guarantees.
But having 20% saved is not enough. The contracting party should have a higher patrimony in order to assume the costs of buying and selling. Otherwise, the entity could consider the operation risky and deny the mortgage. It is best to have at least 35 or 40% savings to convince the bank.
Asking for a mortgage without savings is an almost certain guarantee of failure when trying to obtain a loan, since, together with the point that we will explain next, the money saved is one of the main assets of the banks to ensure success in this type of operations.
Economic solvency and job stability
Do you need a job to take out a mortgage? Yes. One of the main indicators of confidence of a financial institution to grant a mortgage loan is that the signatory has a fixed income, and these are usually the result of a stable job that allows the payment of monthly payments until the end of the mortgage.
It is difficult to calculate the exact figure with which a bank can feel safe to decide to access the firm, but it is estimated that a fixed income of around 2000 euros per month should be enough to get a mortgage and thus devote a maximum of between 30 and 35% of net monthly income to the payment of the same.
This almost completely eliminates the possibility of getting a mortgage being
Not to appear in files of delinquents
Banks take the customer’s financial history very seriously. An impeccable file assures in a high percentage the signature of a mortgage, as well as old defaults or the presence in lists of delinquent make difficult any financial operation.
Similarly, banks will be wary if the applicant, despite not having defaults, has one or more loans in force that could jeopardize the fulfillment of the contract. Above all, if all of them exceed the recommended indebtedness.
Having a guarantor
If the bank does not consider the candidate’s profile positively, the presence of a guarantor could mean the difference between obtaining a mortgage loan and refusing it. In this way the bank will be able to insure itself against a possible case of non-payment.
Having a guarantee increases the possibilities of granting a mortgage, but from the point of view of the guarantor this implies a series of risks, since from the moment of signing a commitment of solidarity is acquired with the contracting party, including his heirs in the event of death.
Extra note: buying a good home
It may be obvious, but buying a good home can be what determines the bank to grant us a mortgage loan. Institutions increasingly take into account the geographical location and attractiveness of the property when granting a loan and therefore, it is also necessary to know the area well.
The reason is simple: if these requirements are met, it will be easier for them to sell the property quickly and at a good price if they have to be awarded it.
These are the main requirements to obtain a mortgage, but there are other alternatives to obtain it. These include expanding our relationship with the bank. Previously we have recommended to reduce to the minimum the contracting of products or services at the time of signing a mortgage, but it is a possibility that has to be contemplated to try to obtain the best possible price.
In this sense, having your salary paid directly into your account, taking out a life and home insurance policy, making contributions to pension plans, taking out cards, etc., will help the bank to see the granting of the mortgage with better eyes.