Even though housing prices have become one of the biggest concerns For those Spaniards who want to acquire their first property, mortgage firms in Spain have increased by 6.2% according to data provided by the National Institute of Statistics. Something that shows that demand continues to rise despite rising costs.
Well, as economists warnthe difficulty of obtaining a mortgage It no longer simply lies in being able to meet a high monthly payment, but also in achieving sufficient savings to be able to meet the entry and operating expenses. To these economic difficulties, we must add a series of requirements imposed by banks to determine whether or not they can grant said loan.
Among these requirements there is a series of reasons why banking entities directly deny mortgage applications. Therefore, as well explained Montse Cespedosaan expert in the mortgage market, it is essential that those who are planning to go to their bank to access mortgage financing for a home take this list into account.
It should be remembered that banks usually deny a mortgage when they consider that, for the financial situation of the applicantit will not be able to repay the loan or it represents too high a financial risk for the entity. Therefore, the profile of those seeking to apply for this type of loan must demonstrate that their liquidity, or that of their guarantors, is enough to meet monthly payments and obligations associated with the mortgage.
These are the reasons for direct denial of a mortgage in Spain
Therefore, the first reason for denying mortgage financing is “have non-payments, overdrafts or delays in installments“explains the expert. Those people who have a negative credit history, that is, who are in the delinquency files or have loans or unpaid credit card, cause your application to be directly rejected.
Another reason that causes a profile to generate doubts in banks is be on sick leave or unemployedbecause even though the unemployment benefit is being collected, there is no fixed or stable income that ensures the future payment of the mortgage payments. Therefore, the entity considers that there is a high risk of non-payment and proceeds to give a negative response to the financing request.
Something similar happens with the third reason, since, even if you have a job, if it is short-term or has been signed the contract less than six months or a year agocan also be an indication of lack of economic stability. Therefore, what Monste Cespedosa recommends is Do not change jobs while the process is open mortgage application.
The importance of savings and debt capacity
On the other hand, one of the fundamental requirements for granting this type of loan is the savings capacity of the applicants. This is because banks do not lend the entire value of the home, but rather usually offer an approximate percentage of 80%, which requires that the future buyer count on at least 20% plus transaction fees.
Therefore, if the entities detect the existence of “recent loans that match your savings capacity“, as the expert explains, they may question the solvency of the applicants and deny it due to the possible risk of non-payment. An issue that is directly linked to the fifth reason, the ability to paythat is, the maximum percentage of income that can be used to pay debts without putting economic stability at risk.
This concept is also known as debt capacity and is calculated by sum of monthly income after payment of taxes and deductions. Once the monthly net income has been obtained, it will be necessary to add all the fixed monthly debts, the total of which must be divided by the income and multiplied by one hundred. This will give the percentage of debt.
If the figure is greater than 35%, the bank will consider that the financial solvency of the applicants is not sufficient to meet the expenses involved in a mortgage, so they will deny the request. Well, as Cespedosa explains, “There is no point in putting a lot of money if you cannot pay the fee and it is below 35%“. So it will be necessary to increase savings and reduce debt before applying.
The expert recommends cleaning the file before making the request
They will also take into account what the expert calls “strange work activities“. This refers to those profiles with very variable income from one month to the next, self-employed workers with little seniority, frequent job changes, temporary contractsunusual economic activities or income from different sources. Well, what entities are looking for is, mainly, a stable and secure profile.
“So, if you meet any of them, my recommendation is that Clean that file well before even thinking about buying a home.“, concludes Montse Cespedosa. This will guarantee that the banks see a solvent candidate with sufficient financial capacity to meet the costs of purchasing a home.