Step 1: When starting the search
Before you start your search, you must know the amount you intend to allocate to your property in order to have a financing simulation . This document is important and it is better to have it before your visits so that you can enhance your file and defend an offer.
Know that the calculation of the assembly will be different if you buy in the old or in the new, passing by the Pinel law for example.
For a very precise simulation , do not hesitate to calculate the amount of taxes generated by your rental income.
Step 2: After the Compromise
It must be understood that it is only from the signing of the sales agreement that the bank can officially initiate the loan application file. This is why a bank does not want to make an “agreement in principle” before the compromise, these are only financing simulation plans.
What are the criteria for obtaining a home loan?
Before committing and deciding whether or not to grant you credit for the amount requested, the bank will carefully study your file. Here are the parameters that your bank will analyze.
Your professional situation
It’s not a secret: to negotiate a mortgage, the professional situation is the most important element . High incomes are a considerable advantage, but it is above all their stability , a permanent contract for example, which will interest the bank.
The amount of your personal contribution
Income isn’t the only indicator of a strong case! The personal contribution is the sum that you provide yourself to the bank to complete the capital of the loan. The contribution is most often used to finance the sequestration , “deposit” of 10% of the price of the property, at the time of the signing of the compromise. In order to reassure the bank, it is preferable to have a contribution at least equal to 10% of the value of the property . Naturally, the higher your contribution, the more convincing your case will be. We often hear that buying a property without contribution is possible. But this means that you are not necessarily going to use your funds in the financial package when you have them. Notary fees, to be paid with the authentic deed, are often easily included in the loan.
The proper management of your accounts , that is to say your financial stability, is also a necessary parameter to have every chance of obtaining credit. If this is not your case, you must take steps to change some habits at least during the 3 months preceding the loan application.
We remind you that you need security savings in all cases to invest, because you are not immune to hazards (condominium works, hot water tank, etc.). Savings are therefore necessary even if you do not use them to buy a good.
Your debt ratio
The debt ratio represents the share of your income that will be devoted to repaying your loan. Most banks will prefer that you have a debt ratio below 35% (compared to 33% before 2021). Try to reduce your current credits if you have any (consumer credit, old work loan, etc.). It is with this rate that the bank will calculate your remainder to live .
Your rest to live
The remainder to live represents the amount you will have left after paying your expenses. It is obtained by removing all of your fixed charges from your income. The remainder to live is ideal for analyzing the profile of wealthy households which, in some cases, can benefit from a debt ratio above 35%.
What are the additional costs of the mortgage?
When we talk about the cost of a home loan, we usually think of bank interest. Yet, there are other costs to factor into the calculation. The APR (Annual Annual Effective Rate) includes not only the bank interest rate, but also the following elements:
The insurance rate
When you apply for a loan from your bank, it will want you to take out a credit insurance contract . This contract must include death cover and sickness-disability cover. Other guarantees can be added, in particular to cover you in the event of job loss. The borrower insurance rate will be added to your bank interest rate.
To grant you a mortgage, the bank will have to put together a file. Also, in many cases, you will pay a sum in compensation. The amount of the application fees is generally between €500 and €1,000 . Some banks may offer you this application fee.
Also mandatory, the guarantee allows the bank to cover itself if you can no longer repay the monthly payments for your rental project, and your situation is not covered by insurance. There are two warranties:
The fees vary depending on the type of guarantee chosen, knowing that personal guarantees are the most expensive.