Finding the right house can sometimes be difficult. Once chosen, the next challenge is not easy either: searching for, comparing, applying for, and being approved for a mortgage.
In some cases, banks may refuse to grant a credit for the purchase of a home. In this sense, learn about some of the most common situations:
#1. Not having a good credit history
When banks lend you money, such as a home loan, they want to make sure that you pay back the amount you were given plus interest.
It is therefore not surprising that they will not lend to customers who do not have a "clean" payment history. If you have already missed payments on previous loans, banks that sell home loans in Portugal may have certain reservations regarding your risk profile, making it difficult for you to access the desired financing.
Furthermore, you should pay special attention to the effort rate, which identifies your capacity to make in relation to your credit charges.
The bank you are going to apply to will pay attention, and you are more likely to be approved for a mortgage if you determine a viable income-to-income ratio.
#2 Loan-to-Value with high risk
One of the main ratios for assessing credit risk, especially in mortgages, is Loan-to-Value (LTV), which is the relationship between the value of a mortgage and the collateral provided.
This ratio, used in real estate loans, equates the value of the mortgage with that of the property given as collateral and is associated with the risk of default in that the lower this value is, the greater the customer's incentive to pay.
However, the LTV does influence the cost of the loan. The higher the value, the higher the spread, since the lender's financing risk will also be higher. On the other hand, the lower the LTV, the lower the interest rate applied.
The recommended ratio should be up to 75%. The higher the ratio, the less leeway you have to negotiate the terms of the loan and the less confidence you have with the bank, in addition to not benefiting from a lower interest rate.
#3 Professional instability
Banks favor clients who demonstrate a stable professional situation. In this way they try to reduce the risk of granting credit to someone who, from one day to the next, may no longer be able to pay the installments due.
In this sense, you will have a better chance of getting a mortgage approved if you have an open-ended contract, work in a financially solid and large company or have seniority in it.
#4 Applying for a home equity loan before you are 25
Age matters when it comes to getting a loan. First of all, it is natural that those in their early 20s will receive a smaller salary that does not make it possible to meet the payments on a loan in addition to their other monthly expenses.
In addition, this is a stage when there is less professional stability, since young people are still in their first jobs.
Finally, there is the issue of having no credit history. Banks hold back when it comes to granting credit to customers they don't know.
#5 Granting credit to only one holder
Banks look favourably on having more than one borrower, since if you have more than one borrower, you can spread the risk over both.
For example, if one of the borrowers is in a precarious professional situation, the second borrower can guarantee the effort of the monthly payments, preventing default.
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