Without a home loan, it is often impossible to manage home ownership today. Banks scrutinize applicants for a building loan very closely. Various requirements are checked before the loan is granted. The banks are primarily concerned with the assessment of the default risk. What exactly does borrower expect here?
With regard to income, it is often also taken into account whether it is a fixed-term employment contract or a temporary job. The latter is not a basic reason for exclusion from a home loan, but can make the application more difficult.
- Before looking for construction finance, Credit Bureau uses a self-assessment to check the financial status of a borrower.
Bank before checking the requirements for a home loan?
The bank will therefore check whether the income and collateral are not offset by excessive monthly expenses. Not only the daily way of life plays a role here. Insurance premiums, existing payment obligations or maintenance obligations are among the points that will play a role.
In parallel, the bank also looks at the value of the property. It is often underestimated that the purchase price and mortgage lending value of a property do not have to match. The latter reflects the bank’s expected value when the house has to be sold. And the mortgage lending value, as the upper limit for the credit line, is often one of the requirements for a home loan.
- If full financing is even sought, the bank would like to be kept informed about modernizations and the progress of these with photos even after moving in.
The higher this is, the sooner the customer gets a loan from his bank and the more favorable the conditions are. Equity therefore plays a major role under the conditions for a building loan. In this way, the bank has more collateral that it can fall back on if its customer becomes insolvent.
- Nevertheless, financing is also possible without equity. However, the interest rate on these construction loans is much higher. Also, not every bank offers financing without equity. However, increasing competition among financial institutions has meant that customers have enough choice if they want to finance without equity.