The first question that usually assails us when we ask to apply for a mortgage loan in 2019 is whether they will grant it to us . The answer to this unknown depends on multiple factors that we will try to analyze in detail. It influences both the value of the home and its price, as well as the financial entity that offers the mortgage, our economic situation and the possibility of providing additional guarantees. Request information without obligation from the mortgage intermediaries selected by Good Lender to analyze if the collaborating banks will grant you the mortgage:
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Some ingredients that you have to know how to mix in the right amount to get the best possible combination: the best mortgage within our reach. The mortgage experts who collaborate with Good Lender will analyze your case, so you know if you can get your loan with guarantees of success.
Solve your doubts about mortgages
The free Good Lender forum offers you the possibility of solving your doubts with some of the best mortgage professionals in the country, economists, mortgage experts or insurance brokers, among others. Some of the questions resolved:
- Do I have a chance to get a mortgage?
- Can I deduct the mortgage in 2018?
- Is it legal for the bank to force me to take out insurance?
In the following video edited for Good Finance we can hear the most common risk criteria used by financial institutions when approving or denying a mortgage loan . Then we expand this information so that a bank customer knows, quite likely, to predict whether their financing will be approved and why.
Purchase value and appraisal
It is very important to be clear about these two values before anything else. Purchase and sale value, market value and appraisal value are terms that refer to the same home but do not have to coincide.
The purchase and sale value is what we pay for the house. It is reflected in the deed of purchase and sale and based on it certain taxes are paid (VAT or ITP, capital gain when it is sold and there is no reinvestment of habitual housing, among others).
The market value and the appraisal value should coincide, but in times of sharp price drop such as the current one (or of increases as in the housing boom), the valuation often does not exactly reflect the market value of the home, since it incorporates the expectation of descent (or rise) in its valuation. In any case, we are interested in knowing the appraisal value.
If, for example, we have saved for expenses (between 10 and 13% of the purchase value, more or less), we will need the mortgage to grant us 100% of the purchase value, at least. There would be no use for a mortgage loan whose limit was 80% of the lowest value between sale and appraisal, for example.
If we have no cost savings and we want a 100% mortgage plus expenses, the only option will be that at 80% of appraisal we reach this amount (the mortgage has no purchase value limit) or a mortgage loan that reaches 100% of the appraised value. Currently, only with very solvent guarantors or double guarantees, there are clear options for 100% mortgages plus expenses.
The bank, to analyze whether we can pay the monthly mortgage payment, calculates our net income and applies a ratio of between 30 and 40% . The resulting figure is called borrowing capacity , and it is the maximum amount of monthly payment that the financial entity estimates we can pay.
If two holders who earn a total of 2,000 euros want to know the maximum fee they can pay, they have to apply the above percentages, resulting in a borrowing capacity of between 600 and 800 euros per month. If the mortgage financing we need exceeds this fee, it is better to find a cheaper house or expect to have more money saved.
To calculate the borrowing capacity of the holders that request financing, the financial institutions take the net monthly income, to which they subtract other installments of loans or cards that are paid and are not refinanced in the new mortgage, as well as fixed monthly expenses not usual (for example, subtract what is paid for child support in case of divorce). In any case, the risk analysis of each entity is different, based on their computer development and real market knowledge.
Applying for a mortgage while unemployed or with a temporary contract is, today, an impossible task. Banks want holders with indefinite contracts or officials, to be able to be. If we are autonomous or have a contract for work or service, we will complicate the matter if we do not provide documentation proving the stability of our income.
The more stability we have in employment, the less unemployment interruptions we present and the better the company and the sector in which we work, the more chances of getting the mortgage.
Many times with our contract and the rest of the owners, it is not enough to obtain a mortgage. With such a high unemployment rate in Spain, banks try to make sure they will collect the money they will leave in every possible way.
If we have money saved, investment funds or other financial product that can be pledged, the chances of obtaining the mortgage increase. The same happens if they sign solvent and equity guarantors or we can provide a double real estate guarantee (which will be partially mortgaged). If we have debts or crowdfunding investments, they will help or harm us depending on whether they are loans (they do not help) or investments (can help).
We have to be aware that it is about convincing the bank that we can pay the mortgage without problems for several decades. If we are not sure, better not try to ask for money.