A housing loan will not be granted to us overnight, even if at first glance we meet all the criteria to receive it. Although it is necessary to prepare well for a loan well in advance, it is not as difficult as it may seem.
Instead of wondering if you have a chance for a home loan, read the Good Finance Credit House mini guide. Perhaps it turns out that sooner than you thought, you will fulfill your dreams of a new home.
Start by calculating your creditworthiness. When looking for the right property, you should be aware of the expenses you can afford and start looking for a new apartment in this respect.
Creditworthiness is simply the option of paying off your future loan installment after deducting all of your fixed and foreseeable monthly costs, which include the cost of living for us as a borrower and for our family members. These may include: rent, bills, cost of car maintenance, maintenance, etc., but also obligations such as installments of other loans that burden our budget.
If the income of the only earning person in the family is not enough to get a loan to buy a large apartment or house, it may mean that we will have to agree or to certain restrictions on the credit granted (e.g. a limited amount of credit in relation to the value of the property), or on the slightly worse financial conditions on which the loan will be granted (e.g. higher margin or additional insurance). When thinking about creditworthiness, you should evaluate it from two sides.
On the one hand, this is the maximum amount that the bank can award us, calculated in accordance with the institution’s procedures. On the other hand, everyone should independently assess the installment they are able to pay on a monthly basis. You should not suggest only the bank’s calculations, but you also need to evaluate our repayment options on your own.
The own contribution is the difference between the loan amount and the property value adopted by the bank: it can be the cost of buying or building a house or the real value of real estate estimated by a specialist. Accumulation of own contribution for a certain period of time is another argument in favor of preparing for a home loan in advance.
If we start to save a fixed, monthly amount for this purpose, we will provide ourselves with such an important element needed to obtain a loan. Even small but systematic amounts are able to significantly affect our finances.
It is also worth remembering that from January 2014 the bank will be able to grant a loan not exceeding 95% of the property value. This means that it will be necessary to make a 5% own contribution or collateral on another property.
In the following years, the acceptable level of credit will be reduced by another 5% and in 2017 banks will grant loans of up to 80% of the property value. Although it will be possible to buy additional insurance, which will cover part of the missing contribution, the amount of the loan may not be higher than 90% of the value together with the insurance.
When choosing a flat and preparing a financial plan, remember about the preliminary contract concluded with the seller or the developer while applying for a loan.
It should include the price of the property, the amount of the advance, the designation of the property and the parties to the contract and the date of conclusion of the final contract, during which the buyer must sign the relevant purchase and sale agreement with the seller.
The bank does not always make it on time to draw up the loan agreement within the prescribed period and then the seller may withdraw from the preliminary agreement without paying the deposit. The loan procedure itself can take up to 3 months.