Many French people want to make a real estate investment, especially to become owners of their home. Everyone is looking for attractive prices, which is not easy in this period when the interest rate is experiencing a heat stroke due to inflation. But beyond this important issue, the biggest concern is a possible mortgage denial. A bank is not actually obliged to commit. After studying the case, she has every right to refuse the granting of this mortgage without necessarily having to justify herself. It is nevertheless advisable to ask for some explanations to better understand what led to this refusal. Although getting a mortgage can sometimes be an obstacle course, it’s important not to get discouraged. Not all banks or lenders have the same requirements, so it is necessary to compete to increase the chances of getting an agreement. It is also necessary to take the time to review your file and improve the points that may pressure the bank not to finance a real estate investment.
The most important reasons for a mortgage loan rejection
In connection with a home loan, there can be several reasons for a refusal of a grant. Nevertheless, there are four main reasons, starting with one debt ratio too high. The debt ratio is calculated according to a household’s income and its fixed expenses. Since 1 January 2022, this rate may not exceed 35%, although certain exceptions are possible. Banks can actually exceed this cap, provided these mortgages do not make up more than 20% of the files processed. Another frequent stumbling block is insufficient personal contribution. If, in rare cases, it is sometimes possible to get a mortgage without a personal contribution, the banks generally require that it corresponds to 10%, even 20% of the total credit amount. Poor account management, including recurring bank overdrafts, is also a major obstacle. The applicant’s professional situation is often scrutinized closely. A worker on a fixed contract is thus much more likely to be able to complete his investment project than a person with a variable income. In the world of real estate loans, financial stability is an important element.
The first actions to be taken in case of refusal
In the case of mortgage loan rejection, it is first of all necessary to understand what motivated this decision. If the debt ratio is too high, there are solutions. It is advisable to reduce your fees, which can go through limiting expenses, renegotiating certain subscriptions (energy, insurance, telephony) or buying back credits for people who already have several loans in progress. If the personal contribution is not sufficient, it is possible to improve this point with financial assistance from a relative. For people who are not on fixed contracts, variable incomes are not necessarily an obstacle. On the other hand, it must be demonstrated that this income over several years has been sufficient to consider a mortgage loan. At this point, the banks generally ask for the right to look at the income for the past three years. As for poor bank account management, this is something that can be remedied over time, although it may initially lead to a postponement of the planned investment.
Property credit, solutions are possible
As stated above, it is essential to bring competition into play when applying for a mortgage loan. Not all banks have the same strategy in this area, and a file that is rejected in one company may well be accepted elsewhere. Sometimes you also have to consider lowering your ambitions. If it is impossible to get a home loan of 200,000 euros, it may be possible for the case to be accepted for 190,000 euros. Extending the term of the loan is also a solution, knowing that the monthly payments will be lower for a loan of 25 years than over twenty years. On the other hand, the interest rate applied will be higher and the cost of credit will ultimately be higher. Another solution is to use a broker. This real estate agent is perfectly placed to detect any deficiencies in a loan application file and to find solutions that make it more acceptable to banks.
By the editors of the hREF agency
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