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How to prepare for a mortgage?

Do you dream about your own apartment? Or maybe you want to change your current four angles to larger ones or build a house? Are you wondering how to prepare for a mortgage? Here's what you should think about before starting your search for your dream place on earth. In this article you will learn:

How to determine what investment you can afford,
How much money should you put aside,
How to build creditworthiness,
What should you do to do well in BIK?
What's better: a loan at a bank or with an advisor

How to prepare for a mortgage - step one

In my opinion, the first step you should take on your way to your own property is to rationally assess your options. It is not difficult to buy a property, spend all the money saved, and then not be able to afford a coffee with friends or a weekend getaway out of town. You buy a property to fulfill your dreams and plans, not to tie a noose around your neck.

Therefore, if you are wondering how to prepare for a mortgage, your first step should be to create a rational household budget, in which you will determine what real estate you can afford. What monthly commitment is your wallet able to bear? I mean not the installment of the loan itself, but also the loan-related costs, transaction costs and maintenance costs of the property (i.e. administrative rent, renovation fund and all other fees).

So how much money should you have set aside?

Own contribution

As of today, the minimum own contribution is still 10%, but definitely more favorable price conditions are offered to customers who have 20% of it. In the case of an own contribution higher than 20%, the price conditions either do not change at all (in most banks) or the differences between them are insignificant. Of course, if you have an own contribution greater than 20%, it's great - you will need a smaller loan amount. However, if you have 20%, that is really enough to get a very good mortgage deal. Banks offer more expensive loans for 10% of own deposits, but if you are convinced that you want to start the transaction now, remember: in the future, when you run out of credit, it will most likely be worth considering refinancing.

Loan-related costs

The loan-related costs related to the disbursement of the loan mainly include fees such as:

commission for starting the loan
the cost of real estate appraisal
insurance: life, unemployment, real estate, bridging

Of course, not every offer includes all the above-mentioned costs. More and more often banks give up commission for starting a loan, and life insurance, like unemployment insurance, is not always mandatory. However, you will always encounter bridging insurance, property insurance and a valuation fee. In the most favorable price offers, it will also be life insurance or unemployment insurance.

It is often the case that by choosing an offer with all the accompanying fees, adding up the costs, we can save a lot of money, so it is worth considering it in budget planning. Such costs in the maximum option should not exceed 4% of the loan value. In some offers, we will also be able to divide them in installments.

Transaction costs

The purchase of real estate also involves a number of transaction costs, such as:

notary
estate agent
PCC-3 tax
court fees

When buying from a developer, you only have to pay for the notary and court fees, which should not exceed 0.7% of the purchase price of the property. On the secondary market, you need to add 2% PCC-3 tax and a commission for a real estate agency - if you buy real estate through it, to the notary's fee and court costs. The standard fee is 2%. However, I meet both higher and lower rates, so here I always recommend negotiating before signing the brokerage agreement.

How to build creditworthiness?

Creditworthiness is one of those elements that there are many myths around. The one that seems most interesting to me is the myth "about hardware in installments". Namely: to build creditworthiness, buy the equipment in 0% installments and pay it back regularly, because without it you have no chance of getting a loan. This is not true. Regular repayment of installments, of course, has a positive effect on our credit history, but with a mortgage, no obligations and no credit history do not disqualify us in any way.

So what affects creditworthiness?

Adequate amount of income
Number of borrowers
Number of dependents
The amount of monthly obligations
No negative credit history.

The amount of income

Banks always consider your net income. Regardless of whether you have a contract of employment, a mandate, a specific task, or run some form of business activity, the bank will look at what amount actually remains in your household budget, after deducting taxes and social security contributions.

Number of borrowers

It matters for the bank whether you take out a loan alone or with another person. It also affects whether you earn income together. If only one of the borrowers earns, then the other will be treated as the debtor.

Number of dependents

Usually, of course, these are children. The bank treats each child as a burden, so the creditworthiness is then lower. 500+ is not included in the ability.

The amount of monthly obligations

Liabilities that affect our creditworthiness are loan installments, the amount of limits in accounts and credit cards. Even if these limits are not used. Liabilities are also maintenance and other costs established by the court.

Bad credit history

The lack of a credit history does not delete us when applying for a mortgage. However, bad credit history - definitely yes.

How to do well in BIKU

The absolute basis for building a positive credit history are:

Timeliness in paying your obligations,
Number of liabilities incurred
Number of credit inquiries

Credit commitments are a really big deal. Every day of delay and every amount, even a zloty, will be recorded and will affect your final score. Therefore, take timely payment of your debts very seriously.

Another aspect is taking out multiple loans. Banks do not leniently treat customers prone to incurring liabilities. So if you have several consumer loans, it is sometimes worth considering consolidating them.

The bank will not look favorably on borrowers who keep submitting new inquiries. Usually this applies to cash loans.

To summarize this topic: pay regularly and make sure that you do not finance the pleasure of a vacation with a consumer loan. It is really very dangerous. Only think about buying a property when you finish your home budget.

Which is better: a loan at a bank or with an advisor?

Regardless of whether you decide to work with a credit expert or you want to go through the comparison of offers and banking procedures yourself, remember: who you work with really matters. Knowledge of banking procedures, the possibility of deviations from them, and the selection of banks and offers in such a way that the transaction is successful is often a complicated matter.

Who you work with is extremely important. And you can find inexperienced and incompetent people both directly at the bank and with credit intermediaries.

These are just a few of the many situations I encounter on a daily basis. Therefore, when choosing a person to help you go through real estate purchase and loan procedures, remember:

Working directly with the bank does not guarantee professional service
If it seems to you that every credit expert just wants to earn as much as possible, know that people working in the bank are also not there for charity. They have sales plans and are often rewarded for how many additional products they sell to you
You can choose a loan advisor yourself, and you come across a random person in the bank
If you believe that you will get the best mortgage offer from the bank where you have your account - that's a myth. In most cases, banks do not have better offers for their clients, and the same for everyone

Summary

Preparing for a mortgage should start with a careful planning of your budget, your expectations and possibilities. A mortgage is a big commitment that we undertake for many years. For this reason, it is so important to think carefully about the costs we will be able to afford. If we did not have any problems with finances before, the mortgage should not cause us any major problems. However, if we have a longer credit history, it is worth dealing with it beforehand and carefully analyzing our options vs. expectations. And most importantly - before making a decision, make sure that the person we work with is competent and will actually help us make the best possible decision.

Remember that if you have any doubts, I am happy to offer you advice and assistance. Let's meet, you will find that my help in choosing the best mortgage can be invaluable.

Feel free to comment. Is the topic of credit analysis interesting for you? Let me know in the comment. Will be happy to help clarify all issues. It is important to me that every topic regarding the mortgage is absolutely explained.