Basic requirements of banks for mortgage borrowers

Requirements for borrowers for mortgages in banks

The entry of a credit institution into a relationship with a borrower is a voluntary action. Therefore, each of them has the right to choose clients according to various parameters. The law does not oblige lenders to issue mortgage loans to everyone who applies.

The lists of requirements in banks are different, the most popular ones can be identified:

1. Citizenship.
2. Age restrictions.
3. Registration and residence addresses.
4. The period of work in the last place and for the entire career.
5. Amount of salary and/or other types of income.
6. Undamaged credit history.
7. Number and quality of co-borrowers and guarantors.

Let's explain each point.

Citizenship

Most banking organizations in our country prefer to issue loans to citizens of the Russian Federation. There are no restrictions in this regard at the legislative level. In the case of lending to foreigners, the risk of non-repayment of funds or their significant loss increases, because finding such a client becomes much more difficult, especially if he has left the borders of Russia. Persons who are not residents of our country can count on approval from those banks whose assets consist entirely or partially of foreign capital.

Age restrictions

The law provides for the possibility of obtaining a mortgage loan at the age of 18 years. Not many lenders agree to approve loans to people of this age. Typically, this opportunity appears starting at the age of 21. At this age, as a rule, a person graduates from an educational institution and gets a job, that is, he has an income.

The upper threshold is set in most cases at 65 years. Some banks consider people under 85 years of age as borrowers. The interest rate for a person of pre-retirement or retirement age may be increased by a couple of percent due to the fact that the bank’s risks increase and the process of obtaining insurance is complicated or eliminated. For military mortgages, the age limit is set at 45 years due to early retirement.

Buying a mortgaged apartment at a discount

The number of collateral properties offered for sale is growing every year. According to experts, every third apartment is sold before the seller has fully paid off the mortgage. To purchase such an apartment, many buyers also use a mortgage loan. But their choice is usually limited. In most cases, in order to buy a mortgaged property, you need to take out a loan from the same bank where the apartment seller once received a mortgage. And if this bank for some reason refuses the borrower, he will no longer be able to buy the apartment he likes. But now programs have begun to appear that allow you to get a mortgage for the purchase of an apartment as collateral from another bank. Absolut Bank gives its clients this opportunity.

A prerequisite for the program is that the seller has a positive credit history. Before the removal of the encumbrance from the primary creditor bank and before the loan is issued to the buyer, the seller acts as a guarantor to the bank. In addition, there should be no court cases regarding the apartment, and no enforcement proceedings against the seller, otherwise the bank will not approve the purchase of such an object.

Bank representatives note that mortgage applications received from real estate agency specialists are always well prepared. A borrower who works with a real estate agency eventually finds a suitable property and buys an apartment in 95 percent of cases. Therefore, banks are ready to give preferences to clients of real estate agencies. Mortgage rates for them are lower than for those who apply to the bank directly.

Most buyers traditionally seek to take out a mortgage from large banks, which account for the bulk of loans issued. But in the situation of a particular borrower, an offer from a small bank may turn out to be optimal. Small credit institutions have to compete with the main players in the mortgage lending market, so they are often ready to take an individual approach to assessing borrowers and offer them loans on terms that cannot be found in large banks.

Amount of salary and/or other types of income

The deciding factor when considering a mortgage application is your income level. It can consist of wages in one or several places, profits from business activities, rental housing, interest on deposits, and other things in various combinations.

The overall income level of the family or borrowers must cover monthly payments and provide an adequate quality of life. It is believed that this is achieved when, after paying the fee, the bank remains 60% of the amount earned for the month.

The approved loan amount directly depends on the amount of income - the higher it is, the more expensive real estate you can afford. In most cases, the bank requires official confirmation of income in the form of a certificate in Form 2-NDFL or a declaration (for an individual entrepreneur). In some cases, it is possible to provide a certificate in the form of a bank or employer. Some credit institutions do not require confirmation of income at all or already have information about accruals (when receiving wages on a bank card).

It might be interesting!

Up to what age can you get a home mortgage in 2020 and bank conditions?

TOP 7 risks when buying an apartment on the secondary market

The report provides full information about living conditions in the area in which the apartment is purchased, about the condition of the house and the apartment itself (including color photographs of it), along with the sale price of the apartment, a comparative analysis of similar proposals and data on the implementation of similar apartments and their prices in previous periods.

According to experts, only 2–4% of the total number of real estate purchase and sale transactions are considered invalid. This percentage is even lower if the apartment was purchased with a mortgage, which means it underwent a multi-stage inspection. Nevertheless, any housing, including mortgage housing, can become problematic if at least one important nuance is missed when purchasing it.

The amounts in each type of cost differ very significantly from each other. The bank approves the loan based on the market value, because this amount is the benchmark for the bank’s return on investment in the event of the buyer’s insolvency.

The only serious danger that a mortgage loan can pose is the possibility of not paying off the debt. One of the distinctive features of mortgage lending is the obligatory pledge of the purchased apartment and the mandatory down payment.

Firstly, in this case there are insurances that banks so stubbornly “impose” on borrowers. If the reasons for your insolvency fall under an insured event, insurance payments will cover all or part of your mortgage debt. An insured event may be the death of the borrower (or one of the co-borrowers) or, for example, loss of ability to work (disability). As in the first case, the buyer gives the seller money to pay off the mortgage debt, a purchase and sale agreement is signed, which is IMMEDIATELY sent to the MFC. When the agreement enters the Rosreestr, it suspends the registration of the transfer of rights to the apartment on the grounds that the apartment is pledged. But when the seller pays off the debt and the bank removes the collateral, Rosreestr will register the transaction.

Usually, borrowers themselves turn to the bank with a request to put their apartment up for sale. This decision to repay the loan is beneficial to the banks, so they meet the debtors halfway. You can see what offers exist on the market on the Internet by searching for “Collateral Property Showcases.”

The assignment of the right to claim an apartment is used when it comes to housing in a new building where the seller has not yet moved in.

Undamaged credit history

The experience of repaying loans of a potential borrower is very important for the bank. The following facts are investigated:

• Overdue or unpaid dues.
• The amount of funds borrowed and the time during which they were repaid.
• Cases of early repayment.
• Litigation on the issue of non-fulfillment of obligations by the client.

If the loan terms are systematically violated, the borrower may be blacklisted. In this case, you should not count on mortgage approval.

First step

You can skip this step and start with the next one. But I still recommend doing it.

I recommend contacting a mortgage broker who knows almost everything about mortgages. It will then take much less time to choose a bank, the likelihood of receiving a loan will increase, and in a number of banks, a loan can be obtained under special programs with better conditions.

This is important to know: Application for disqualification of a judge in civil proceedings: sample 2020

The benefits of such treatment can many times exceed the monetary costs of paying for the services of a broker.

Then, I recommend going to a real estate company and concluding an agreement with a realtor so that buying an apartment with a mortgage is simple and does not turn into an endless “walk through agony.” When buying an apartment on credit, you need to take into account a lot of features: if a realtor professionally works with mortgages, he knows all these features.

Of course, the work of both a mortgage broker and a realtor costs money, but in the case of a mortgage, it is better not to save on this. Although the choice is yours.

Number and quality of co-borrowers and guarantors

The presence of co-borrowers significantly improves the situation due to the fact that his income is added to the income of the main borrower. These persons bear equal responsibility to the bank. Accordingly, his risk of non-return of money is reduced.

The guarantor also becomes an advantage. Claims are made against him for payment in the event of failure to fulfill his obligations by the person who entered into the mortgage lending agreement.

These persons may be any person. Most often, they are close relatives - parents, children, spouses, and the like.

How does a bank evaluate a borrower for a mortgage?

A potential borrower submits an application for a mortgage loan to the bank. In it, he provides the necessary information about himself, confirming it with documents. Employees of the credit institution conduct a comprehensive study and analysis of them according to the parameters described above.

The result can be generated in one of two ways:

1. Using automated programs. By entering the initial data using a pre-written algorithm, a solution is obtained.
2. Through the Credit Committee, which reviews a report drawn up by a bank employee based on his analysis.

The latter option is being used less and less due to the large investment of time. An automatic response can be received faster, but the program does not make any concessions and increases the number of refusals.

Most often, a credit institution uses an algorithm that involves assessing each parameter using a point system - gender, age, length of service, credit history, and so on. The likelihood of an application being approved depends on the total score.

It might be interesting!

What should the salary be in 2020 in order to get a mortgage?

Request for early repayment of a mortgage loan:

There are a number of situations when the bank has the right to demand a full return of the mortgage loan, despite the absence of violations of the terms of the agreement on the part of the borrower. Such situations include violation of the operating conditions of the mortgaged property (redevelopment, repairs without approval from the bank, etc.), as well as failure to comply with the obligations to insure it.

The above-described dangers when obtaining a mortgage are relevant to borrowers who have already taken out a mortgage loan, but it is also worth noting a number of problems that may be encountered before receiving it directly:

• Situations are possible in which real estate that was planned to be purchased using a mortgage does not meet the bank’s requirements, as a result of which the borrower is forced to return to searching for an apartment;
• With regard to title documents for real estate, banks also impose certain requirements, non-compliance with which also entails refusal to approve a transaction with such real estate;
• Often, the set of documents that a seller of real estate must provide to the bank significantly exceeds the set of documents for the sale of such real estate without the use of credit funds, and therefore there are often cases when sellers refuse to work with buyers on a mortgage.

How to increase your chances of getting your application approved

In order to realize your dream of purchasing a home, you must meet the requirements described above. Do not take out or repay loans taken on time, secure your last job, receive official income, attract co-borrowers and guarantors, and so on.

There are some factors that can be an additional advantage:

1. Official marriage. Young families with spouses under 35 years of age are treated more loyally and the percentage may be reduced. There are also measures of support and subsidies from the state.
2. Employment in municipal or state bodies. It will be easier for the bank to work with such a client, because it will be possible to attract an employer.
3. Receiving wages on a bank card. Such clients are usually subject to a simplified application review process and/or a reduced percentage.
4. Movable and immovable property (in addition to the acquired property), which can be easily sold to pay off the loan debt.

Programs for the purchase of real estate

Most often, the offers of credit institutions are used by those people who do not have their own home. The purchased property becomes collateral and until the mortgage loan is fully repaid, the borrower cannot dispose of the collateral.

Secondary housing

A mortgage for a secondary home has an optimal interest rate.
Most citizens buy apartments not in new buildings, but on the secondary market. This allows you to choose an apartment at an affordable price for the buyer in the most suitable area. The advantages of such mortgage lending include:

• wide selection of objects;
• optimal interest rate;
• minimum down payment amount;
• the ability to purchase housing without involving guarantors or providing information about income.

Lending conditions vary from bank to bank. But general trends can be identified:

• the borrower's age is 21-65 years;
• minimum work experience at the last place of employment is 3-6 months;
• interest rate 9-14% per annum;
• loan term is 5-30 years.

A mandatory condition for issuing a mortgage is an assessment of the cost of housing by independent experts. The borrower can receive up to 85-90% of the appraised value. One of the conditions is property insurance, which is registered as collateral. Also, a number of financial companies recommend life and health insurance. This condition is not mandatory, but if refused, banks increase the interest rate in order to minimize risks.

The term for obtaining a mortgage loan on the secondary market is on average up to 1 month. It is counted from the moment the application is submitted until the transaction is completed.

Buying a new building

The conditions under which loans are issued for the purchase of an apartment in new buildings are practically no different from the conditions of mortgages on the secondary market. But banks are ready to give money only on the condition that the house is being built by a developer verified by the bank.

A number of financial and credit institutions stipulate in the loan agreement a condition according to which the interest rate until the house is put into operation is higher. This can be avoided if you choose those new buildings that are being built by partners of the selected bank. To increase the attractiveness of such projects, banking organizations offer borrowers to take advantage of special offers and take out a loan at a reduced interest rate.

To obtain a mortgage for the purchase of an apartment in a new building, you must make a down payment of at least 10% of the appraised value of the property.

The requirements for borrowers who want an apartment in a new building remain the same as for buyers of housing in old buildings. The interest rate depends on the amount of the down payment; it varies on average from 8.2 to 14.25%. In some banks you can find special offers on more favorable terms. The down payment must be at least 10% of the appraised value of the property.

Secured by your real estate

Taking out a mortgage secured by your real estate.
If the borrower has his own real estate, he can use it as collateral for a mortgage loan. Using this scheme, a borrower can buy an apartment even if he does not have his own funds.

This is possible due to the fact that banks are ready to give up to 80% of the appraised value of real estate, which serves as collateral. The client has the right to buy cheaper housing or take money for other needs.

This type of lending is unpopular in Russia.

For house and land

Financial companies are ready to provide money not only for the purchase of an apartment or house, but also a plot for construction. The collateral will be the acquired land, house and other outbuildings located on the site. In order for the bank to approve such a mortgage, the selected plot must meet the following requirements:

• location in or near a populated area;
• the opportunity to use the land for the construction of a residential building.

If the documents indicate that the selected plot is classified as agricultural land, the bank will not agree to issue a loan.

A mortgage on a land plot can be issued if the land is properly registered.

Compliance with SNiP for construction in populated areas is checked separately. The land must be properly registered and owned by the citizen who is selling the plot. When purchasing not a house, but a plot for construction, the client must be ready to pledge not only the purchased land, but also other property.

You should not count on getting a mortgage to buy a home if it:

• cannot be recognized as residential in accordance with the Housing Code;
• the building is dilapidated or recognized as unsafe;
• the house is a self-build property that is not properly registered;
• the site is not registered.

The amount of overpayment on such mortgage loans is slightly higher than when purchasing an apartment in a finished or under construction building. Banks issue loans at 11.5-14% per annum. The maximum loan term is 30 years. Banks are ready to give from 60 to 90% of the value of the purchased real estate. It is not the market price that is taken into account, but the estimated value.