When estimating the maximum loan amount, the bank takes into account the credibility and creditworthiness of the customer. When applying for a mortgage, the value of the property securing the repayment of the liability is also significant.
What is creditworthiness?
The maximum amount of credit granted at a bank or credit unions (cooperative savings and credit unions) depends to a large extent on the creditworthiness estimated for the client or clients. This ability depends on the financial situation of potential borrowers.
Banks have their own methods of determining creditworthiness, but most often it is the result of such factors as:
- the amount of monthly income,
- the amount of monthly costs incurred – for the maintenance of the house or flat, car, family, etc.,
- compulsory financial charges – installments for other loans and credits, alimonies, etc.
When calculating creditworthiness, banks take into account and other, less obvious factors relevant for a given client, e.g. place of residence, marital status, age, number of children, history of servicing the current debt, or even a profession.
If a loan application is submitted by several bank persons, then when calculating the creditworthiness for the whole application will take into account the financial situation of the main borrower and all co-workers.
The maximum amount of mortgage
A special type of loan obligation given by the bank is a mortgage. In his case, not only the individual creditworthiness of the client will affect his final, maximum height – it will also be affected by the value of the property constituting the collateral of the liability .
The relation between the value of collateral and the maximum loan amount, called the LtV ratio, may not exceed 80-90%. This means that the customer must have his own contribution. From 2017, this contribution should amount to 20%. value of real estate bought, but 10% may be replaced by appropriate insurance.
Credit credibility matters
The mere fact of documenting a fixed income of an appropriate amount may not be sufficient for the bank to grant the loan in the desired amount. The maximum amount of the liability also depends on the customer’s creditworthiness. It is best if it has a good credit history at the Credit Information Bureau, without delaying the repayment of principal and interest installments, but at the same time already repaying the loan.
Income sources are also taken into account. Better perceived are people who work permanently, full-time and have relatively high income than those who earn income on the basis of civil law contracts, even if they were much higher.