The credit process or Mortgage Credit step by step
We usually start thinking about mortgage loans in the moment we decide to change our housing status. Regardless of whether we buy a flat on the secondary or primary market, or dream of moving to a larger flat, the whole undertaking requires appropriate earlier preparations. It’s best to start doing this before you find your dream apartment or house. Loan Process Mortgage loan step by step
The fact is that a mortgage is a completely different product than a cash loan, which we can get immediately. We will not get mortgages “without proof”, in one day, as is the case with consumer loans for any purpose. Obtaining a mortgage involves a very complicated complicated process, and requests for obtaining are governed in advance by separate procedures and methods of analysis during the whole loan process that must be passed by everyone if they want to finance the purchase of their own real estate. Therefore, read the following article to save yourself unnecessary nerves and make the optimal decision. Loan Process Mortgage loan step by step
Because it is a very serious financial commitment in the lives of the majority of people who dream about their own apartment, it is advisable to go to a specialist in the field of reliable advice and coordination of activities in the field of applying for a product with the participation of a reliable credit adviser. It is the duty of a credit counselor to explain to us in detail what awaits us during a fairly complex credit process. Thanks to his experience and knowledge, we can count on an effective plan of action, which will effectively reduce the time of obtaining a mortgage. And we will buy the property found safely on time without worrying about the seller’s down payment and whether we will manage everything on time. Loan Process Mortgage loan step by step
With a mortgage loan, a good credit advisor will help us participate in negotiations with the bank, but also for example from the Seller, including the Developer, if there is a need for the provisions in the contract or other key issues. On our behalf, the advisor knows how to negotiate and what arguments to use so that the price terms of the loan are the most advantageous for us, ie loan margin, terms of early repayment without commissions costs, but also negotiations of various provisions in the credit agreement. An example may be the negotiations regarding the obligation to have additional products, i.e. the obligation to have a credit card, life insurance, etc. Credit process Mortgage loan step by step
Analysis of loan offer and loan agreements
It should be remembered that a mortgage is only a tool that allows us to purchase real estate, it is important to choose appropriate solutions, and a credit advisor will help you. What is the loan process for applying for a mortgage? Below is a step-by-step guide to the procedure for applying for a mortgage.
The entire loan process associated with obtaining a mortgage can be compared to a pulse that is measurable in our arteries. Just like in everyday life, so in the process there is an accelerated heartbeat when the dates in contracts with the seller chase us. The small and lazy heart rate usually occurs on the bank side, which is given to others who are in the whole process. So to align your entire heart rate, it is advisable to use the experience of a good credit advisor who will prevent a collapse (refusal to grant a loan) during the entire project.
When you are not sure whether you need a product at all, do not fill out the contact form. In this way, you do not waste time with other customers who at that time expect quick help from us, thanks to which we can keep high standards of service and a fast process.
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We apply for a mortgage loan or credit procedure for granting a mortgage
Steps of the credit process step by step to withdraw funds
The first step: meeting the Advisor with the client
When thinking about mortgage loans, we should measure our strength for intentions, this is very important so we should be aware of what expenses we will be able to afford. The amount of the maximum amount available from a mortgage loan often determines the scope of apartment search, which is why it is worth to estimate your creditworthiness in the first place. Meeting with a credit counselor has the task of making us aware of the situation from the level of the future borrower and also allows to realistically plan a future investment related to the purchase of an apartment or house. By the way, we will also learn about the requirements for documents and get acquainted with the simulation of installments and additional costs around credit, which increase the total cost of the planned investment. Loan Process Mortgage loan step by step
What will be necessary for us to meet with an adviser for an efficient assessment of our abilities? First of all, information from the employment contract (period, whether it is an indefinite or definite contract, from when), and data on our average remuneration from the last 3-6 months. In the case when we run our own business, we will also need financial documents from the current and previous tax year. The credit advisor, based on the information received, will initially estimate our creditworthiness, which depends, among other things, on the income, the number of people in the family, the loan amount and the repayment period. So we have to meet very strict conditions. For the bank, the best solution is when the borrower’s earnings are high, while the bills and other obligations that they pay are as low as possible. The invoices include monthly payments for rent, car and food and clothing expenses. Other liabilities include installments of other loans, loans, guarantees, etc.
For the bank, it is also important if we have credit cards with high limits and debits in the account – all of this effectively reduces our creditworthiness. You have to remember that a mortgage is not only a way to make your dreams come true in order to buy your own apartment. With credit, I make many sacrifices, which results in an additional burden on the household budget for the next few or several decades.
When you take out a mortgage, your credit rating will probably be severely tarnished or completely exhausted. Therefore, if we are planning additional expenses for equipment or renovation, we should not count on future bank loans. It is better to immediately decide on a higher amount of the loan, and the savings should be spent on the necessary work and an emergency fund. Mortgage is the cheapest source of money available to individuals, so you can not find another cheaper loan on the market.
During the first meeting with the credit counselor, he should provide us with a list of the required documents for the loan application, on which we will find, among others, current valid identity document, a certificate of employment from the employer on the bank’s printout in which we would like to receive a loan, annual testimony submitted to the Tax Office or a PIT document from our employer. If we earn our income in a different way than through a contract of employment, their list will look different and certainly will be longer. In addition, documents related to the real estate being purchased, ie the land and mortgage register, the basis for purchase of the purchased property by the current owner, a certificate from the cooperative about the right to the premises or the lack of arrears in fees will be needed. The list of documents will be extended when the subject of the transaction is the construction of a house or the purchase of a real property and its renovation. Loan Process Mortgage loan step by step
Signing the preliminary contract
for the purchase of an apartment, house or plot
The signing of the preliminary contract may take the form of a notarial deed or an ordinary civil law contract. The basic difference between the two forms lies in the legal consequences that arise from them. In the case of a civil law contract, which we usually sign in the real estate office, a claim is made as to the down payment. In the case of a contract drawn up in the form of a notarial deed, this entails claims for the performance of the entire contract, on the terms and conditions set out in the act. Additional protection may also be recorded on the claim that will then appear in the land and mortgage register. An additional difference is certainly an additional cost, which we must incur in the case of a preliminary contract in the form of a notarial deed that we pay in a notary’s office.
Regardless of what form we will use, it is worth using the advice of an experienced credit advisor, thanks to which we will save your time and money in the event of a badly prepared contract that the Bank may not accept.
The contract should include all necessary information, ie: the price of the property, the amount of down payment or down payment, the property identification and all parties to the contract, and the relevant information required by all banks – the deadline for concluding the final contract. This last element is worth estimating with a certain margin of security, because the entire credit procedure can take up to three months.
Second step: Submission of loan applications
At this stage, the credit advisor will offer you mortgage products free of charge and impartially on the basis of the situation presented by us, best suited to our needs and specific life situation. The obligation of the future borrower is to provide all documents requested by the adviser. At the meeting with the adviser, we decide which banks we will apply for under the terms we can obtain. Why should we submit applications to several banks (max 2-4)? Loan Process Mortgage loan step by step
In the case of a positive decision from more than one bank, firstly we have a field to negotiate with other banks and, secondly, we are calmer in case that the Bank of the first choice with the best conditions refused to grant us a loan – it is a kind of security in case of unfavorable circumstances. Loan Process Mortgage loan step by step
The process of analyzing the application looks similar in each bank, analysis is carried out in terms of the validity and completeness of the documents and then goes to financial and real estate analysis. It should be kept in mind that the time for analyzing the application may be extended, in particular in the case of temporary offers, when the bank promotion is in progress. During the analysis, the Bank, as an institution that lends us money, wants to be sure that we will be able to repay the borrowed funds, so we may request additional explanations on various issues that are directed to the adviser who represents us. The adviser provides the bank with information on behalf of us and with our consent and mutual knowledge. Therefore, the adviser during the whole process is in constant contact with us.
During the analysis, property valuation is made. Whether we buy a flat on the primary or secondary market. The subject of the valuation is real estate, on which the Bank will secure the so-called mortgage entry in the land and mortgage register. By means of a valuation, the Bank verifies the value of the property or by chance is not lower than the amount of the loan granted and whether it meets the criteria for the subject of collateral, including Is it suitable for living etc. Most banks will not be secured on a property that is intended for renovation or is in poor technical condition.
For the valuation of the property, we will pay, depending on the bank, from PLN 0 to PLN 900; we can also make an appraisal study ourselves, the cost of which is also about PLN 400-500.
Third step: Credit decision
The Bank after conducting a financial analysis in which it evaluates our creditworthiness and also performs formal and legal analysis of the real estate that we want to purchase, also verifies us in the Credit Information Bureau, including in terms of whether we are able to pay off the obligation for which we apply. At BIK, we verify our history of how we served other liabilities provided by other financial institutions in terms of their service or there were no delays in repayment of installments, which adversely affects our assessment. Banks verify min. 2 years back the history of other obligations, but sometimes they look also up to 5 years back or we did not have stumbles. Therefore, we are screened with our consent, which we express by signing the loan application. Loan Process Mortgage loan step by step
Some banks also issue so-called initial credit decisions only assess our financial situation to borrow. Such a decision is always conditional. It is accompanied by a list of documents that we must provide to the lender – the Bank. Such a decision may change to a negative one after the valuation of the real estate or after providing explanations or documents that are included in the decision. If we have submitted applications to several banks at the same time, it is the right time to compare the received offers and reject the least attractive ones.
By issuing a final credit decision, the bank often also sets conditions, only after they have been met – the provision of additional documents or explanations makes it possible to prepare a loan agreement. In simple cases, decisions are made without conditions, so the contract is usually prepared immediately or on the day of the filling. It should be noted that each Bank has its own internal procedures and the validity of decisions in each bank is different. Usually the credit decision is valid for 30 days, although you can find a bank that issues a decision with a validity period of up to 90 days, which is then extremely comfortable for us. Especially when we are waiting for other decisions from other banks or in other specific cases for us.
Fourth step: Negotiating credit terms
When we receive at least two positive credit decisions from banks, it is much easier for us to negotiate in order to negotiate more favorable terms. Certainly it will not be easy from the client’s level, because most of the bank’s employees will try to convince us that there is no possibility to negotiate and the proposed conditions are very attractive. Therefore, in this case, it is worth using the services of independent credit advisors who know the competitive offers available on the market and are also able to justify any negotiations based on facts, describing the client’s individual situation. In addition, such an advisor may also use his contacts at the bank’s headquarters, which open many doors and suddenly it turns out that you can get the conditions for which we have applied. Finansowa Przystań has many business contacts, so negotiations are not a problem for us. We managed many structures in banking so we know from the other side the negotiation possibilities of banks and for our clients we obtain the most favorable conditions. Loan Process Mortgage loan step by step
After satisfactory negotiations for both parties, calculation of the full loan installment and verification of any additional costs, i.e. insurance, additional obligatory products such as credit card or ROR account, all offers should be analyzed and the most favorable one chosen for us. In this case, one should not take rash decisions, because the consequences will be felt for the next decades. Therefore, it is worth to carefully consider all pros and cons together with your credit adviser to make the right decision about choosing the offer of the bank with which you want to get involved for longer.
The fifth step: Signing a loan agreement
Once we have made the decision about the choice of the offer and the bank, a loan agreement is prepared at our request, which may take several days. At this time, we suggest you familiarize yourself with the model of such a contract and ask for clarification of any doubts of your adviser. It is also worth finding out how long it will take to pay the loan, this information will be useful to us when preparing the notarial deed. In each bank, this procedure takes differently from one to three days
Regardless of whether we have already familiarized with the loan agreement model, when signing our copy of the contract, please read it carefully. The contract contains provisions relating specifically to our case, including requirements regarding the so-called cross sellu, that is additional products (credit card, ROR), which we must buy and maintain for a given period, to count on a lower loan price.
Before signing a contract, it is always a good idea to contact your credit counselor, certainly on the basis of his knowledge and experience he will catch more details or possible mistakes that may or may not occur. Thanks to his help, we will avoid many unpleasant consequences, eg during the signing of the final contract in the form of a notarial deed, in which we are served by the execution in the event of non-payment of the seller’s funds. For people who do not have the knowledge and experience in the payment of funds to overlook a small detail or the supposedly prosaic condition that appears before the payment of funds from the loan can cause a lot of trouble. Loan Process Mortgage loan step by step
Sixth step: Payment of the loan
After signing a loan agreement with a bank, you can make an appointment with a Notary and conclude the final contract transferring ownership of the purchased property. The notarial deed indicates, among others, dates and amounts of payments. In the notary act, the appropriate information will be included in the scope of our own contribution to the funds coming from the loan. To pay the loan, the Bank will require the presentation of a notarial deed, and proof that we have paid our part of the price, the seller, unless such information is confirmed in the notarial deed. In the event that the seller will be missing confirmation that receiving some of the funds from our side, the Bank will require 100% additional document confirming the fact of payment of the seller’s funds. Such confirmation will be eg a confirmation of the transfer from our bank account. Loan Process Mortgage loan step by step
However, before the funds are on the seller’s account, we will still have to perform the formalities related to the mortgage entry in favor of the bank that grants us the loan. There are two solutions, the first is the conclusion of the application in a notarial deed (additional cost at the Notary Public) or the submission of an application to the District Court in a specific Land and Mortgage Registry Department relative to the location of our real estate. Sometimes banks in this area are able to relieve customers themselves and propose that they will handle all formalities for us. Additionally, after the activity related to the security in the land and mortgage register, we will also have to insure the property against fire and other fortuitous events – usually on the value of the real property given by the credit decision or on the minimum of the amount of credit granted.
When the seller receives all the funds, in particular a transfer from the bank from the funds granted to us, the stage of applying for the loan ends and the repayment begins.
The situation is different when we buy an apartment from a developer on the primary market, the Bank pays out the loan in installments as construction progresses, before signing the final notarial deed.
The last condition that we will have to meet after paying off the loan is to provide the bank with an extract from the land and mortgage register with a mortgage entry on its behalf. This should be submitted as soon as we receive such information from the Court that an entry has been made in the land and mortgage register. In the interim period, we incur higher credit costs. Depending on the bank and the decision, these are additional monthly premiums that increase the monthly loan installment or it is an increased interest rate on the loan as a result of which, for the first period, we have higher loan spreads and thus a higher installment. Some banks reduce our costs themselves when they receive notification about making an entry from the Court, but this is a rarity. We advise you to take care of your own case because the banks have millions of customers, and it is in our interest to make the payments lower costs. After all, the Bank is not a charity and it’s its job to make money on us. Loan Process Mortgage loan step by step
Applying for a mortgage is a very complex procedure with many stages, some of which last from several days to several weeks or even months. Do not be surprised that the credit counselor is not able to promise at the first meeting how long you will have to wait for the loan. This fact is made up of many factors that we mentioned, including good contact with the client regarding the clarification or supplementation of documents requested by the Bank. However, a good credit advisor will use all known methods that are designed to shorten this process and for sure thanks to the cooperation with him, applying for a mortgage will be simpler for us and, above all, faster than if we wanted to get it on our own in a bank where clients are often treated as object-wise.
Finansowa Przystań makes every effort to ensure that the whole process is understandable for the client and at the same time fast, and in the case of different situations, together with the whole team, we find an alternative solution for the given situation, so as not to leave the client alone. Feel free to contact us. Loan Process Mortgage loan step by step