Buying a house is everyone’s dream and goal, however the process is not always easy. The truth is that the vast majority of Portuguese people cannot gather enough capital to buy a house without outside help, thus needing to resort to support and mortgage loans.
Deciding on the best credit is a difficult task, as this is one of the most important and longest commitments in everyone’s life. A bad choice can cause you to lose a lot of money. It is essential that there is a thoughtful reflection before any decision.
A credit is nothing less than borrowing money. Therefore, a mortgage loan is a loan of money intended for those who want to buy a house.
This is often a long process and involves several steps.
Before applying for a mortgage
Before making any kind of decision, we advise you to:
- Define your objective and choose the type of property you want;
- Know your budget (bear in mind that in Portugal we are limited to 90% financing, that is, a person who wants to buy a house will always need to make a down payment of 10%, adding taxes and related purchase expenses);
- Calculate your effort rate (this rate corresponds to the percentage of household income allocated to the payment of credit products. It is calculated by dividing the value of financial charges by the total net income of the household).
After these three well-defined points, you should carry out several simulations to be able to compare and choose the proposal that best suits your needs.
Phases of a mortgage loan process
1- Sending Documentation
After the simulations have been carried out and the financial institution chosen from which to apply for credit, you will be asked for some documentation:
Phase: analysis and pre-approval
- Personal identification document;
- Last IRS statement and Settlement Note;
- Income statements;
- The last 3 salary receipts or, in the case of issuing green receipts, the last 6 receipts;
- Bank statements from the last 3 months;
- Declaration of Contractual Relationship (issued by the employer);
- Statement of commencement of activity (if applicable);
- IBAN proof;
- proof of address;
- Map of Responsibilities of Banco de Portugal;
- Last statement for each of your credit cards (if applicable)
Phase: property valuation
- Building Booklet;
- Property Content Certificate;
- Property Plans.
Phase: writing
- User license;
- Mortgage deed;
- Energetic certificate;
- Approved construction project;
- Construction/Works License (if applicable);
- Budget for the works with a description of the work to be carried out (if applicable).
2- Analysis and Pre-Approval
This is the phase in which, after sending all the documents, the institution will analyze whether the process is viable to be able to move forward or not. This is because, in the case of credit or, in other words, a loan of money, the institution is obliged to assess whether the future debtor will be a good potential customer or not. That is, if you have the ability to return the borrowed money.
In this stage, which can last about a month, factors such as professional situation, income, effort rate, etc. are evaluated.
If the customer meets all the necessary conditions, the housing credit process is ready to proceed to the next step.
3- Property Valuation
The evaluation of the property serves so that the bank can determine the maximum amount that it is willing to finance to the customer.
This is the phase in which a technical visit by an appraiser will take place, requested by the financial institution, and at the end a report will be issued accordingly.
There are several aspects to be taken into account by the appraiser when determining the value of the house, such as location, area, lighting (number of windows), surrounding infrastructure, year of construction, among many others.
Note that this process normally incurs costs for the customer charged by the financial institution, commonly called evaluation commissions.
4- Credit approval
It is at this point that the letter of approval, or letter of offer, is issued. This confirms all the final conditions of the housing credit.
5- Deed of Purchase and Sale
The buyer becomes the legal owner of the dwelling at the time of the deed, which is carried out with the presence of all intervening parties at the Land Registry Office or at the Notary Office.
Then it’s time to conclude the mutual agreement with a mortgage, encompassing everything related to mortgage loans. Here the financial institution provides the customer with the amount necessary to pay for the property.
We remind you that on this day you must have proof of payment of the IMT (Municipal Tax on Onerous Transmissions) and the IS (Stamp Duty), as well as the use license and the energy certificate.
It is important that you carefully assess the impact that the decision to buy a house can have on your life, on your household income and on your future.
We remind you and advise that, before moving forward with any housing loan, do a detailed research and several simulations. When your decision is finally made and the financial institution has been chosen, worry about putting together all the necessary bureaucracy.
You can speed up and facilitate the process with the help of professionals and specialized consultants who will find the institution that offers you the best conditions.
