What are the requirements for an approved housing loan?

Documentation required to deliver to the bank.

The first guarantee you need to propose applying for a home loan is that you have all the necessary documentation.

To hire a housing loan to buy a property, the bank requires the following documents:

Identification of the holders.

Tax Identification Number (TIN);  

Last income tax statement;

Three last payment slips;  

Three most recent bank statements.

Map of credit responsibilities without occurrences.

Therefore, once you have gathered all this documentation, you can proceed with the loan application to the banks.  

Effort rate within maximum limit

Afterwards, and based on the documents you submitted to the bank, an analysis is done on your income compared to your expenses with credits. This factor is called the effort rate.  

As a rule, banks allow an effort rate of up to 30%, but the recommendation of the Bank of Portugal is that the rate does not exceed 35%. This is so that banking entities protect themselves against the risk of default by customers. So pay attention to the recommendations:

0%: Very high 35 to 40%: High 30% and < 34%: Ideal =<30%: Maximum ideal

Therefore, the bank will proceed with the calculation of your effort rate to understand the amount of income earned by the household versus credit installments. If, already taking into account the housing credit installment, the effort rate exceeds 35%, the bank may not approve your credit, subject to exceptions.

3. Equity for the initial investment.

In addition, in order to proceed with the hiring of mortgage credit, you need to have a certain amount of equity to use as an initial entry to the bank.

In other words, currently banks do not finance mortgage loans at 100%, so it is always necessary to provide a portion of the house value.  

If it is a secondary own accommodation, banks finance up to 80% of the property value, and if it is a permanent own accommodation, they lend up to 90% of the property value. So, at least, you will have to provide between 20% to 10%. Note that these percentages will apply to the lower value between the acquisition and evaluation.  

For example, if the house you are buying for permanent residence has a sale value of 250,000 euros, but was appraised at 220,000 euros, and the bank offered a loan of 90%, you will have to provide 22,000 euros (10% of the lower value).

4. Capital available for payment of taxes and process expenses

Additionally, you still need to have available capital to pay two taxes and the bank processing fees. These can still be high values.

In property deed, you have to pay: Stamp Duty and Municipal Property Tax on Onerous Property Transfers (IMT).

Regarding values: Stamp Duty represents 0.8% of the property acquisition value, and IMT applies to the highest value between the acquisition value and the Taxable Asset Value (VPT). However, the IMT value already varies according to certain factors: the applied rate can range from 1% to 8%, depending on the property value, the location of the house, and its purpose.  

However, it is possible to be exempt from paying IMT in certain situations, such as when the property for own and permanent housing does not exceed 97,064 euros on the mainland and 121,330 euros in the Autonomous Region of Madeira and the Azores.

Regarding process expenses, these are related to bank commissions, such as evaluation, opening and process study, formalization, and the cost of mutual registration with mortgage. The commission values can range from 500 to 1,300 euros, and a mutual registration with mortgage at Casa Pronta costs 700 euros.

If you need help to confirm that you meet all the requirements for hiring a home loan, you can turn to a Poupança no Minuto credit intermediary. With a quick and assertive response, the mediators help you in all phases of the process for free.

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