Applying for a mortgage is usually more time-consuming and bureaucratic than other types of credit, such as car or personal loans. This is because buying a house represents the most significant financial commitment in a consumer's life.
The home loan approval process can take an average of 3 months, but this period can be extended if you don't pay attention to each stage. During this period, the bank will:
- Assess your income and financial stability.
- Consult the Bank of Portugal's Liability Map.
- Analyze your current charges and effort rate.
- Request a valuation of the property you want to buy.
Find out about the five stages of approval for a home loan and how you can optimize your chances of approval
How do I get my mortgage approved?
Although it's a somewhat lengthy process, knowing all the phases makes it easier to speed it up and have all the documentation ready and organized. Of course, it's likely that you'll need guarantors and there's also the possibility of choosing repayment methods other than constant installments, such as a grace period or deferral of capital, which will affect the conditions of the home loan.
1 - Sending documentation
Once you have chosen the financial institution where you want to apply for a home loan, you will be asked to send the following documents:
- Personal identification document - ID and NIF or Citizen's Card;
- Documentation proving income - photocopy of the last three payslips, photocopy of the last three bank statements, photocopy of the last IRS declaration and tax assessment note, employer's declaration proving employment and seniority in the company;
- Documentation relating to the property - photocopy of the Certificate of Title (also known as the Permanent Land Registry Certificate), Land Registry Booklet, Technical Data Sheet for the Dwelling, License to Use, Floor Plans and Energy Performance and Indoor Air Quality Certificates;
Depending on the profile of each consumer, the following documents may also be required:
- For self-employed or independent workers - Deed of Incorporation of Company or Start of Activity and the last two IRS returns;
- Three most recent proofs of credit liabilities listed on the Bank of Portugal's Liabilities Map;
- For those who are divorced - Judicial Divorce Judgment and Agreement on the Exercise of Parental Power;
- Proof of investment of own capital;
- Proof of other income, if applicable.
Ideally, you should gather all the paperwork while you're still looking for your house so that the whole process can be carried out more quickly.
2 - Pre-approval of the home loan
Once all the documents requested by the bank have been sent in, there follows a phase in which the bank will analyze whether or not the client is viable to go ahead with the loan.
The pre-approval of the home loan thus consists of a first ratification, not of the loan itself, but of the consumer's eligibility. Obviously, banks want to be repaid the amount they have lent, so they first assess whether future borrowers will be good potential customers.
It is precisely at this stage that they will look at your professional situation, your income, your effort rate, etc.
3 - Property valuation
Once the mortgage has been pre-approved, the property will be appraised. This is directly related to the conditions of the loan: it determines the maximum amount that the bank will be willing to finance.
In this third step, the bank hires a specialized, independent company to appraise the property and issue a report accordingly. The appraiser determines the value of the home based on various aspects, such as location, size, number of windows (lighting), services and surrounding infrastructure.
Also note that this procedure has costs for the consumer which, as a general rule, take the form of the so-called appraisal commission, which is charged to the client by the bank - this is not usually the case when the property belongs to the bank itself.
4 - Home loan approval letter
After the property has been appraised, the approval letter (also known as the offer letter) is issued, which confirms all the final conditions of the home loan. From this moment on, there can be no changes to the values and rates in this document.
5 - Drawing up the deed of sale
After the credit approval letter, you enter the final phase of the credit agreement to buy a house.
First of all, you will now have to pay the IMT (Municipal Property Transfer Tax) in situations where there is no exemption. This is the first part of the final stage, because proof of payment of this tax must be presented at the time of the deed.
This is followed by the deed of the house, which is carried out in the presence of all the parties involved at the Land Registry Office (using the Casa Pronta service) or at the Notary's Office. Here, the buyer becomes the legal owner of the house. The following documents are required for the deed:
- Tax and civil documentation for both parties;
- Proof of payment of IMT;
- Identification of the property's registration and matrix;
- License to use;
- Energy certificate.
This phase is thus subdivided into two stages: firstly, the signing of the deed of sale (described above) and then the signing of the loan agreement with mortgage, which covers everything related to the mortgage. It is precisely after this that the bank provides the client with the amount needed to pay for the house.
Source: https://www.comparaja.pt