Mortgage credit: How to know if I have financial capacity?

Are we ready to move forward with the analysis of the viability of your home credit? The Minute Savings, with its free credit intermediation, deals with the process with banks in an instant. To understand how this phase proceeds in practice, read below.

First step: Sending of documentation

To ensure that you have the financial capacity to proceed with a housing loan, it is necessary to provide documentation to a credit intermediary or directly to banks. From there, the entities assess your income and determine if you are able to pay a housing loan installment, as well as the maximum amount you can afford to pay.

So, the first step is actually this: gather some documents that describe, mainly, the income of the holders who will propose a loan.

Let's review each one of them:

• Personal identification document.
• Last IRS settlement notice.
• Last IRS statement.
• Income statement;
• 3 last payslips;
• If necessary, green receipts for the last 6 months and a statement of start of activity.
• Document proving the contractual link, provided by the employer entity.
• 3 last bank statements.
• Map of responsibilities of the Bank of Portugal;  
• Proof of IBAN.
• Proof of address.

Second step: Ensure financial capacity.

From there, the bank advances with a feasibility study, analyzing your effort rate, to verify if you have financial capability. Being able to support a housing loan installment, the entity also declares the maximum amount it is able to pay for a property, considering its financial context.  

But what is the effort rate? This concept represents the relationship between the total monthly income of a household versus expenses with credit installments. For example, if it is a couple applying to be homeowners, the income of both is taken into account.

The ideal effort rate, according to the Bank of Portugal, should be between 30% and 34%. If this couple receives a total of 3,800 euros per month, the maximum amount they can pay in credit installments is 1,500 euros (1,500/3,800) x 100 = 34%. So, if they pay 500 euros for a car loan, they can only have a housing credit installment corresponding to 1,000 euros.

This is the calculation that must be carried out to determine the effort rate, which the bank will analyze. Some banks approve effort rates up to 40% and others up to 30%. Therefore, it is essential to request proposals from more than one bank.

Third step: Find the property for pre-approval of credit.

After determining the maximum installment value you can afford for a mortgage, it's time to choose the property (based on the values indicated by the bank in the feasibility study).  

After the property search phase, with or without the help of a real estate agency, contact the banks with the specific amount in question. At that moment, the banking entities redo the simulations and issue the pre-approval of the credit.

It is important to note that you can always request simulations from various banking institutions and obtain more than one pre-approval. This phase does not require you to proceed with the process. You can choose only one bank to proceed with the proposal that best suits your family unit.

Yes, it seems like a complex process. And that's why credit intermediation professionals are here! With their mediation services between you and the banks, they handle all the bureaucracy in various phases, free of charge. With the help of a Savings agent in the Minute, this process is simplified.