Real estate loan refused: what to do?
Real estate loan refused: what to do?

What to do if your mortgage is refused?

The bank refuses your loan application? Don't let yourself be discouraged and immediately adopt a more positive dynamic because, even if the bank does not have to justify a loan refusal, you can inquire in order to find out which aspects of the file were blocking. Is it the debt ratio? The level of contribution? A bank overdraft? This step is important since not all banks have the same allocation criteria. This return from the bank then allows you to improve your file, and thus increase your chances of obtaining your mortgage.

The overdraft: often prohibitive to obtain a loan

Indeed, for some banks, the bank overdraft is a prohibitive element for obtaining a mortgage. Other banking establishments are less careful, and favor an analysis based on other data from your borrower profile. "My credit application was refused because of my bank overdrafts with a large public bank, even though I had a large contribution. But a mutual bank agreed to follow me for my real estate project", remarks Mélanie, happy owner of an apartment in the Paris region. "The first bank refusal is always a little stressful, especially since we have a time limit included in the compromise to find a loan offer. But in the end everything went well," she adds.

The suspensive condition for obtaining a mortgage

compromise or agreement to sell generally includes a condition precedent for obtaining a mortgage. If the buyer does not obtain financing, the sale cannot be finalized. However, it will be necessary to present the proof of one or even several bank refusals.

Why do banks refuse certain files?

You will have understood that certain elements of the file can be causes of loan refusal. The bank overdraft, and more broadly the management of the accounts involves a presence of agios, which highlights poor management of your accounts to your advisor. But it is not the only reason. A debt ratio exceeding 33% is another, just like the level of savings, the remainder to live after mortgage, the level of contribution, the professional stability or the health of the borrower... In other cases, the wear rate can exclude certain profiles (borrowers with health risks for example).

professional stability

Professional stability is a key element for taking out a mortgage. The bank will indeed base itself on your income to establish your borrowing capacity according to a threshold that it cannot necessarily exceed: 33% of your income. But it does not stop at your debt ratio or the amount of your salary. What also interests the banker is your type of employment contract. Are you on CDI? Are you old in the company? Is your trial period validated? So many questions which will reassure or not the banker who evaluates the interest rate and the granting of the mortgage according to the risk factor. If you carry out a professional activity on your own account or are on fixed-term contracts, you must demonstrate that you have been stable for at least two years. But if you are in this situation, getting a loan can be more complicated, especially if you are borrowing alone.

The level of contribution or the duration of the mortgage

While some banks accept financing without contribution, also called 110% credits, most require a contribution. of 10% to 20% minimum of the cost of acquisition. Amount that will cover the costs associated with the purchase, in particular the notary fees. Note that they reach between 7 and 8% of the sale price in the old against 2 to 3% in the new.

The rate of wear

The rate of wear is the maximum rate to which banks must refer when financing individuals. That is to say, the real estate rate they offer you is framed. And all credit-related costs are integrated into the total cost of the mortgage, which must not exceed the famous wear rate. The purpose of setting this rate is to protect borrowers. However, in some cases, and due to very low borrowing rates, it may be excluding for certain borrower profiles. The wear rate is defined each quarter by the Banque de France.

Borrower insurance

Thus, the state of health of the borrower can be a blocking element for taking out a mortgage. And this, despite the Aeras agreement, which aims to provide access to credit for risky profiles. In some cases, the cost of mortgage insurance is so high (thus with significant risks for the bank) that the APR (annual percentage rate of charge) exceeds the wear rate. In this case, the bank cannot finance the individual.

Choose delegated borrower insurance

Borrowers now have the option of changing their borrower insurance and choosing the cheapest offer. They can do this:

  1. Before taking out the mortgage (and the bank cannot go back on the proposed real estate rate);
  2. One year after taking out the mortgage (15 days before the anniversary date);
  3. And every year on the anniversary date (Bourquin amendment).

However, they must comply with a few rules, in particular the condition of equivalence of guarantees (i.e. the chosen contract must have the same level of guarantees as the bank contract and the notice period: 15 days for the Hamon law and two months for the Bourquin law).

How to get your home loan despite a refusal from your bank?

  1. Review your loan application file and clean up your accounts by settling your current credits, for example;
  2. Go around other banks;
  3. Contact a real estate broker (online or in an agency) to help you;
  4. Play the competition for your borrower insurance (brokers or online comparators can also support you in this process).

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