Bank inspection of an apartment when purchasing with a mortgage

Banks' requirements for borrowers are becoming more stringent. Illegible handwriting can be a reason for your application to be rejected, and the only dark spot in your credit history can prevent you from getting a mortgage for 10 years.

The bank’s task is to find the borrower’s “weak points,” and yours is to make sure they don’t exist. We will look in detail at how you can increase your chances of getting a mortgage approved and smooth out the rough edges.

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Make sure you are age appropriate

From the bank's point of view, the borrower should not be too young or old. Citizens aged 26 to 30 have the highest chances of getting a mortgage approved

The minimum age to apply is 21 years old.

Officially, a mortgage agreement can be issued at the age of 18, but banks are reluctant to approve such applications. Borrowers who have barely reached the age of majority are most often still in school, do not have a credit history, do not have a permanent source of income - or are working, but their work experience is too short. It is difficult for the bank to assess their creditworthiness and prospects, so it is easier to refuse.

After age 55, your chances of getting approved for a mortgage drop sharply. The older the borrower, the less likely the application will be approved. The borrower's age at the maturity date of the mortgage is often publicly stated in the bank's terms and conditions.

It is better for older borrowers to ask one of their younger relatives to sign up for their loan, if they agree. This is the best way to avoid mortgage problems later in life.

Get your credit history in order

Credit history is a document that characterizes the payment discipline of the borrower. It is compiled by the credit history bureau (BKI). The credit history covers 10 years from the date of its last update. When approving a mortgage, banks carefully check all the information accumulated during this period.

Credit histories contain the following basic information:

• about requests for loans;
• about loans issued or refusals to provide them;
• about open credit cards;
• about surety agreements;
• about current and overdue debts.

If you don't intend to take out a loan in the foreseeable future, it's best not to apply just to see if you'll be approved or not. It’s the same with credit cards, which banks often offer: don’t apply for them unnecessarily, and if you don’t use them, close them.

Check your credit history

Not only banks, but also borrowers themselves can request a credit history. First of all, you need to check your credit history for errors - most often these are unclosed loans and overdue loans. This should be done at least a month before applying for a mortgage in order to have time to correct possible errors.

How to check your credit history:

1. Find out which BKI stores your credit history. This can be done online by sending a request to the Central Catalog of Credit Histories of the Bank of Russia through the Gosuslugi portal. Having learned the list of BKI where the credit history is stored, the borrower can request it free of charge twice a year. This is done online through the bureau’s websites.
2. Check the information in all bank offices where your credit history is stored - banks can send requests to different organizations.
3. If an error is discovered, contact the bureau and write a statement detailing the inaccuracy and requesting that it be corrected. A response must be given within 30 days. If you refuse to make corrections, your only option is to sue the BKI.

A simple absence of debts and arrears in your credit history is already half the success when applying for a mortgage.

Make sure there are no serious delays

With a bad credit history, banks may permanently block your access to a mortgage. Even a minimal delay can become a stop factor - for example, more than five days over the last 10 years. Most banks have less stringent requirements; debt of 60-90 days is considered critical

for your entire credit history or the year preceding your mortgage application.

The only advice here is to repay all loans regularly. What ends up on your credit history will remain there for 10 years.

Improve your credit history

Even a damaged credit reputation can be restored or improved. To do this, you should take out a small consumer loan or get a credit card, make a purchase and repay the loan on time.

A clean credit history is not an advantage; it also requires improvement. If you have never taken out a loan, the bank may consider this a disadvantage, since it will not be able to verify your integrity using specific examples.

For those who have never dealt with loans before, before applying for a mortgage, you can “practice” - for example, take out something relatively expensive on credit for two or three months (TV, refrigerator, computer). With minimal interest losses, you will gain experience in applying for a loan and a positive record in your history.

Choose a bank that already has a service history

If you decide to submit an application, it’s better to do it in the branch where you already keep your deposit, where your salary is paid, or where you already have an issued loan. The conditions for your clients are much better, in addition, you can count on a reduction in monthly payment within 0.5%. If you add up the total amount, the savings will be impressive. For reliable clients and “our own” interest rates always vary downward.

It is important to remember: a successful credit history, even for minimal amounts, significantly increases your chances. Even if you have been withdrawing meager amounts from your credit card for several years. The specialist evaluates your ability to correctly distribute personal finances and timely returns, rather than money spent.

Pay off all loans and debts

An increased credit load almost always leads to refusals. Based on credit history, a special Debt Burden Indicator (DLI) for individuals is even calculated, which also affects the chances of approval of a mortgage application.

When repaying any loans, be sure to contact the bank for a certificate stating that full payment has been made on the loan and the organization has no claims against you. This is an additional guarantee in case of errors.

Before applying for a mortgage, take the time to check yourself for all possible types of debt through the services of the State Services portal:

• car fines;
• legal debt;
• tax debt;
• utility debts.

All pending fines and penalties, utility bills and tax debts are visible in your credit history. It would be better if, when checking, the bank does not come across such “sins” of the borrower.

Do not take loans from microfinance organizations (MFOs)

Banks a priori believe that citizens who use microloans have poor management of their income and are unable to pay their mortgage, despite the fact that they can pay them regularly. The very fact that the borrower used this service is a reason for the lender to doubt his financial situation.

Save up a down payment above the minimum

The minimum down payment on a mortgage that most banks work with is 15-20% of the price of the apartment. If you want to increase your chances of getting a loan approved, try to save more than this amount. Ideally, half the cost of housing. This will show the bank that you can manage your income rationally and will be a reason to improve the terms of the loan.

If your savings are less than the minimum down payment threshold, if possible, it is better to postpone applying for a loan, or ask for financial help from relatives or friends.

Maternity capital can help you save for a down payment—from January 2021, it is given for your first child. The vast majority of banks accept certificates for payment. But remember that for the creditor, a new addition to the family means the appearance of a new dependent, which may influence the creditor’s decision not in your favor.

A number of banks have mortgage programs without a down payment, but there are very few of them, and the conditions are much less favorable - the interest rate is usually 1-2% higher than the base one. But if new housing and a mortgage are vital, with this option there is a greater chance of approval of the application.

Finance a new property, don't buy a secondary fund

At the beginning of the article, it was not for nothing that we mentioned the increased number of approved applications. The more applications, the more mortgage loans are issued. Accordingly, more apartments are being purchased. If demand increases, the apartment increases in value (the market is limited in the delivery of new square meters). We approved the mortgage and took a loan for the down payment - after a few years, the selling price of your apartment increased by 10%.

What does such a maneuver achieve? You can negotiate with the bank on the sale of collateral, registration of other real estate - up or down. Finally, nothing binds you about the sale of the apartment and the completion of the contract. Of course, you need to be careful. Growth is cyclical. But what can be foreseen for sure is that new apartments will always be at a good price. Unlike the secondary fund, communications wear out, the condition of the house gets worse and worse every year. If at the time of purchase of housing the life of the house was 15 years, then after the end of the contract it is already 30 years. The price of an apartment will drop by at least 25%. With new real estate, the price will be stable or will win back 10%.

By following the above tips, you will not only receive 100 percent approval for your mortgage (even on maternity leave), but you will also be able to increase the investment value of your property.

Make sure your profession meets the bank's requirements

This is roughly how banks treat different professions when approving mortgage applications:

Following the coronavirus pandemic in 2021, banks are cautiously considering mortgage borrowers who are employed in affected industries - the hotel business, sports and fitness organizations, and catering establishments.

When checking the borrower, the lender also checks information about his employer. He pays special attention to the following:

• contributions to pension and other funds;
• regularity of tax payment;
• presence/absence of bankruptcy and seizure of the company’s property.

Separately, it is worth mentioning the work experience of the borrower. The total working experience of the mortgage applicant must be at least one year. Work experience at the last place of work is at least three to six months, depending on the requirements of a particular bank.

What should the profession be?

One of the important conditions when considering an application is work experience . The minimum requirements that banks set for mortgage approval are at least 6 months of work experience at the last place of work, and at least 1 year in total.

Bank managers also focus on how often the applicant changed jobs.

If there are a large number of entries in the work book and there are dismissals on sensitive issues, the bank may consider the client unreliable and refuse a housing loan.

For which professions are mortgages closed?

Banks are reluctant to approve mortgages for representatives of the following professions:

• Businessmen - entrepreneurs do not have a stable income. But managers of large enterprises who have had good and regular income for a long time can well count on mortgage approval.
• Lawyers - people in this profession also have unstable income, except when they work for a company under a contract.
• Realtors - and although representatives of this category often have a good income, banks find their earnings extremely irregular. In times of crisis, their income is even less stable. Therefore, getting approved for a mortgage will not be easy.
• Judges - these people, by law, have personal immunity. The bank does not have the right to demand loan payments from them. Therefore, banks are wary of applications from representatives of this profession.
• Professions involving risk to life - rescuers, military, racers. These people have a dangerous profession and are at risk of losing their ability to work, so banks are reluctant to approve mortgages for them.

Estimate and confirm your official income

All borrower income is assessed by banks in aggregate, but is divided into basic and additional. The main ones are, first of all, a salary from a stable job or profit from an established business. Without them, getting approval is much more difficult.

The income must be regular and necessarily official. The bank will definitely not take into account the salary “in an envelope”.

Make sure that the monthly payment on the future mortgage does not exceed 40-60% of the total official income (the sum of basic and additional income). Banks have a separate requirement for this.

Sources of income that are usually taken into account by banks:

Keep in mind that a pension cannot be your only source of income when considering a mortgage application. Those who live only on rent money will also have to work hard to earn the favor of the lender. It is better when pensions and/or rent are taken into account not as the main income, but as additional income.

Income that banks do NOT take into account when approving a mortgage

• income from investing in securities (dividends, coupon income, etc.);
• insurance payments;
• income from participation in LLC and dividends on placed shares in JSC;
• income from purchase and sale transactions of currency, securities, goods, movable and immovable property, property rights, etc.;
• winnings and prizes from participation in gambling and lotteries;
• fines, penalties and penalties received;
• bonus payments and remuneration, except for payments received at the main place of work/part-time place of work;
• state benefits (except for temporary disability benefits);
• alimony;
• scholarships;
• donor rewards, etc.

Solvency

The most important requirement that banks place on all borrowers without exception is solvency. The level and stability of income is directly proportional to the regularity and making of monthly payments on a housing loan.

To document and confirm your income to the bank, you need to submit a certificate in form 2-NDFL. A bank option is possible. Other certificates and documents confirming additional or main income will also be useful.

The main incomes are:

• salary at main place of work;
• pension;
• income received from business activities.

Additional income is:

• earnings from part-time work;
• rentier income - from renting out real estate;
• income from any other type of activity.

The monthly loan payment should be half the total family budget. If this amount comes out of all your income, then the bank will approve your mortgage.

Financial obligations such as debts, alimony, and other loan payments are deducted from your total income. The loan amount will be deducted from the balance.

List all your additional assets

The possibility of mortgage approval will increase if the borrower owns any assets or valuables - provided that they are not already pledged.

The following can be considered as assets:

• automobile;
• an apartment or a share in it;
• non-residential real estate (garage, cottage, storage room, parking space);
• bank deposit.

A separate account for a more or less decent amount (for example, 300-400 thousand rubles) will definitely not be superfluous. When applying for a mortgage, in any case, you need to have a “safety cushion” that would be enough to pay off at least six monthly payments.

Interest on deposits is considered as an additional benefit. The amount deposited in the account should be large enough to attract the bank's attention - and at the same time not greatly influence the overpayment. Otherwise, it is better to add this money to the down payment.

Take a co-borrower or guarantor

If it is difficult for you to take out a mortgage for the required amount, you can share this burden with a co-borrower or guarantor. No more than three persons from each category can participate in one contract.

Co-borrower

- this is a person who will bear joint responsibility with the borrower to the bank and repay the loan.

If there is a co-borrower, the lender will consider his income along with yours as a borrower - but also debts. Therefore, when involving someone in a mortgage, make sure that this person is not included in the “risk group” - has no criminal record, has paid off all loans and taxes, has not been in arrears, and is in a stable financial position. Relatives - brothers and sisters, parents - are most often involved as co-borrowers. They must submit the same documents to the bank as the borrower.

Officially married spouses automatically become co-borrowers.

Banks favor family borrowers, especially if both spouses work and earn income. If one of the married couple refuses to be a co-borrower (or, for example, he/she has a bad credit history), it is necessary to draw up a prenuptial agreement in advance. There you can document the terms of liability to the bank in the event of a divorce.

Guarantor

is the person who will pay the debt on your behalf if you are unable to repay it.

The difference between a co-borrower and a guarantor is that the first begins to repay the loan together with the borrower, and the second only when the borrower is no longer able to repay the debt. The requirements for guarantors are the same as for co-borrowers. When applying for a mortgage, the guarantor sends the same package of documents to the bank as the borrower.

Submit applications to several banks at once

The surest way to increase your chances of loan approval is not to limit yourself to a single bank. Most often, borrowers do this - they send one main application to the place where they would like to get a mortgage first, and together a few more “to be on the safe side.” But the main thing here is not to overdo it.

It is recommended to submit no more than three to five mortgage applications per month. Each such request is reflected in the credit history. If there are too many applications, the bank may regard this as panic and financial problems for the borrower.

Submitting an application to several banks at once will at least save you time. If one creditor refuses, you can wait for the results of other requests. When you submit an application to only one bank, if it is rejected, you can submit a new application there only after two months.

It is quite possible that you will end up getting approved for several applications at once from different banks. Then you will be able to choose the option with the most favorable conditions.

But there is also the other side of the coin - if three applications in a row are rejected, this can become a stopping factor for banks. But this happens extremely rarely - when mortgages are requested by obviously insolvent people or people on stop lists with a bad credit history or criminal record.

Be careful when submitting applications

Inattention and a frivolous attitude towards filling out the application form and submitting documents for a mortgage can play a cruel joke. Banks refuse loans even for the most insignificant, at first glance, reasons - there is no signature here, there the name is written in lowercase, here the data does not match. The result is a rejected application.

Typical mistakes of borrowers that can lead to mortgage denial:

Concealment or substitution of information.

Banks check all information about the borrower through many databases - you cannot hide from them either a criminal record or the presence of children. When filling out the form, answer the questions honestly and be willing to confirm the information.

Errors and inaccuracies in documents.

Any typo or correction in an official document - and the bank can easily refuse a loan. Inaccuracies can be corrected, but the fact of refusal will forever remain in your credit history. Therefore, be sure to check basic information such as full name, contact details and job information, and the relevance of certificates.

Your mortgage application has been approved – what next?

Surely, when you contacted the bank, you already found a suitable option. If not, remember that from the moment your application for funding is approved, its validity period is strictly limited - no more than 3 months (different institutions announce their own terms). During this period, you must submit an offer to purchase the selected option. Delay, increase in waiting time - you will go to the second round of approval.

Your purchase will most likely be approved automatically. It is necessary to confirm that the house has been put into operation and that all necessary title documents are available.

Attention!

Before starting financing and signing the contract, check the availability of additional payments - insurance coverage.
Most likely, the insurance will coincide with the term of the contract. Calculate her load on all payments. Before you move into your new apartment, it will be assessed. Such services are always performed by companies that work closely with a financial institution. It will not be superfluous to have your own assessment result - it must coincide with the bank assessment. The price for such a service is minimal - but you will know for sure that you are covering the real cost of the chosen housing. How to get a mortgage. Why are mortgages rejected?

Reminder: how to increase your chances of getting a mortgage approved

• make sure you are the right age
  (if you are under 21 years old, delay your application if possible; the best age for a mortgage is from 26 to 30 years old; if you are over 55 years old, the chances of getting approval are sharply reduced);
• put your credit history in order
  (request your credit history; make sure there are no serious delays or errors; if necessary, improve your credit history by taking out and repaying a loan; pay off all existing loans, debts and fines; do not take microloans from microfinance organizations);
• save up a sufficient down payment
  (the more you save, the better; if you don’t have enough money, borrow from relatives or friends, or try applying for a program without a down payment);
• make sure that your job meets the bank's requirements
  (take into account the nature of your job when submitting a mortgage application - hazardous professions, industries affected by the coronavirus and entrepreneurs are rejected more often; confirm a total work experience of at least one year and at least three to six months of experience at the last place of work; make sure that the employer pays taxes regularly and is not on the verge of bankruptcy);
• estimate and confirm your official income
  (document your income; compare your total income with your mortgage payment and make sure that no more than 50% of your earnings are spent on a loan);
• indicate all your additional assets
  (tell the bank about all your property and savings, make a separate deposit in the bank for 300-400 thousand rubles for a “safety cushion”);
• get a co-borrower or guarantor
  (the co-borrower will pay the mortgage together with you; the guarantor will be able to pay the debt if you are unable to do so).
• submit applications to several banks at once
  (fill out applications to two or three banks per month, no more; do not submit applications “just like that” if you are not going to take out a loan);
• Be careful when submitting applications
  (check the application and documents for inaccuracies, errors and typos; write only the truth in the application and do not hide anything).

How to find out why your mortgage was rejected

Your mortgage has been rejected - try to find out the reason.

• Ask a bank employee. They are not required to provide the reason for refusal. But some banks meet customers halfway and tell them why they did not give a loan.
• Compare the costs of loans taken and income. Usually they refuse when expenses exceed 40% of income.
• Check your credit history. Request it from BKI. Refusals come to clients who did not take out loans or were late in payments.

Plus compare yourself to the list of top reasons above. Perhaps you fall under one of them.