Applying for a mortgage is often a long and tedious process to go through when it comes to buying a home. In fact, knowing the steps to follow to apply for a mortgage correctly is essential for the applicant’s future.

At Culmia, we know how important it is to have proper, step-by-step guidance throughout the mortgage application process. That’s why we’re here to show you how to handle this entire process correctly. Stay tuned!

What are the requirements for applying for a mortgage?

After choosing the desired home, the requirement for applying for a mortgage is to demonstrate that the applicant meets the profile banks look for when granting this type of financing. Therefore, the following criteria must be taken into account when applying for a mortgage:

• Savings: When applying for a mortgage, the applicant must have saved at least 30% of the value of the property they wish to purchase.
• Guarantees: A prospective mortgage applicant can provide the bank with a financial guarantee to ensure that, no matter what happens, their monthly mortgage payments will continue to be made.
• Clean credit history: This requirement is very important because banks review the applicant’s credit history to verify whether they are on any list of delinquent borrowers or have any outstanding debts.
• Revenue to be allocated to contributions: according to the Bank of Spain, it is recommended that anyone interested in applying for a mortgage not spend more than 30–35% of their monthly income on mortgage payments, in order to ensure they can meet the monthly payment required by the bank.
• Stable employment: The bank needs to ensure that the applicant will be able to make the monthly mortgage payments. Therefore, people with stable, permanent employment will be given higher priority than other applicants, although this does not mean that a self-employed person or someone who is unemployed cannot apply for a mortgage.

Set a maximum payment amount

How much am I willing to pay? This is the question prospective homebuyers should ask themselves when applying for a mortgage, since banks generally only finance 80% of the property’s value. As a result, the borrower will have to cover the remaining 20%, plus an additional 10% for application fees and the costs associated with purchasing the home.

In addition, the applicant must choose between a fixed-rate mortgage —where the customer pays the same monthly payment for the duration of the loan—a variable-rate mortgage —under which a fixed payment is made for the first year and the amount subsequently varies, based on the benchmark index agreed upon with the bank—or a hybrid mortgage —which combines a fixed and a variable payment. The applicant should research and compare the various mortgage options available on the market, taking into account the factors that are important to them when signing the mortgage agreement.

In addition, the homebuyer should take into account any fees that may be included in their mortgage contract, such as subrogation, prepayment penalties, or floor clauses. These fees can usually be negotiated with the bank providing the mortgage, and in many cases, the cost can be reduced to zero.

Documents Required to Apply for a Mortgage

Once the requirements have been met and the type of mortgage to be applied for has been decided, the applicant must provide the following documents:

• Personal identification document (DNI, NIE, or passport).
• Income tax return for the previous year.
• Bank statements from the past few months.
• Updated work history.
• A list of the various properties you own.
• Rent receipts, if you live in a rental property.
• A CIRBE document verifying the various active credit transactions.

After the necessary documentation has been submitted, the bank will review the transaction for possible approval and will send the customer the following documents:

• The European Standardized Information Sheet (FEIN).
• The Standardized Warning Form (FiAE).
• A copy of the contract containing the text of the two preceding documents.
• A document listing the mortgage expenses paid by both the customer and the bank.
• If you choose a variable-rate mortgage, the bank will determine the amount of the monthly payments.
• A document stating that the customer must visit a notary to receive the free mortgage advice offered by the bank.

Duration of the mortgage application process

Although the exact duration of the entire mortgage application process can vary, as a general rule, this process usually takes about one month. During this time, the applicant must select a home, choose one of the mortgage contract options, negotiate with the bank, submit the relevant documentation, and review the mortgage contract.

The paperwork involved in applying for a mortgage is no easy task; however, if you follow the steps “to the letter,” the entire process will go smoothly and without any unexpected complications.

And you— do you already know what kind of mortgage you want for your home?

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