Pocket finances. Here are the keys to getting your mortgage.

It's been an intense December. The last month of the year with Christmas shopping, New Year's reflections, and family events always brings a certain intensity. But if you add to that a never-ending move and a possible house sale, you have all the elements for a high-intensity situation.

Believe it or not, I've handled it very well. I'm sure the van getaway I told you about in Pocket travel. Start the new year traveling., helped relieve tensions. In this post, I tell you all the keys I've soaked up in recent weeks so that, when the time comes, you become an expert in applying for your mortgage..

Each (tic-tac) is a second of life passing by, fleeing, and not repeating. And there is so much intensity, so much interest in it, that the problem is only knowing how to live it. Let each person solve it as they can.

Frida Kahlo

Anticipate the bank

The first thing you'll have to do before even starting the mortgage study is to talk to the bank to see if what they call the big numbersalign. To not waste time, I'll tell you in advance what they will ask you and what you need to be able to answer to continue the process.

To qualify for a mortgage, you'll need to have saved between 20% and 30% of the purchase value. This money must be available in a bank account or saved in an easily accessible product. For example, funds that you can sell with some urgency.

This percentage will depend on your age and your autonomous community. In the case of the Balearic Islands where I reside, they have approved advantages for the purchase of a first home by young people (under 35). In the following sections, I will delve into these advantages.

Associated expenses

Before anything else, I'll introduce you to the expenses associated with signing a mortgage:

1. The down payment. This is not an expense per se, but it's money you'll need to have. It's the part that the bank doesn't finance. In the best case, the bank can offer you a mortgage of up to 90% of the purchase price. If that's the case, you should contribute a down payment of 10%. If the conditions of seniority in your job or salary are not so robust, they will offer the standard 80%, so the down payment would be 20%. Here we need to do a thorough search and compare different banks.
2. Property transfer tax (ITP). It represents a percentage of the purchase price. It ranges from 0% to 8%. It can be decisive when it comes to whether or not you can get a mortgage. Keep reading to find out what that percentage depends on.
3. Gastos de Notary and registration fees. If we have to estimate expenses, it's advisable to go high to have margin. Here you can consider that this point will take 2% of the purchase price.
4. Appraisal. To give you the amount to finance, the bank will ask for an appraisal of the house. It's advisable to look for an appraisal company that is approved by the Bank of Spain. If so, any bank is legally obliged to accept the report. This way, we don't commit to any specific entity, and we can negotiate the rates once we have the favorable report.
5. Opening comission. In this case, the conditions offered by the bank should compensate you a lot if they don't eliminate the opening commission, which usually ranges from 0.5% to 2%. Many banks nowadays already have it eliminated.

Possible deductions or discounts

Now that we know all the dreaded expenses to face, let's see how to make these outlays smaller:

• You can benefit from a significant discount if you are under 35 and your autonomous community has approved aid for the purchase of the first home. I'll tell you about the case I know. In the Balearic Islands, if you are under 35 and buy your first house, the ITP drops from 8% to 4%. And beware, if you are under 30, that tax is reduced to 0%. Another question would be who in their twenties can consider buying a house. But well, that's another matter.
• As for the appraisal report, it depends on the surface to be appraised, but if we hire it online, we can get discounts up to 30%. The companies I know that are approved by the Bank of Spain and, therefore, accepted by all banks are: Global, Tinsa and Sociedad de Tasación.
• It is important to emphasize the importance of obtaining a good appraisal report. Obviously, this does not depend on you, but you should know that to be able to finance 90%, the appraisal must be higher than the purchase price. Specifically, they will give you a maximum of 80% of the appraisal amount or 90% of the purchase price, whichever is less. For example, if the house is worth €200,000, the bank will give you 90%, or €180,000, as long as the appraisal is equal to or greater than €225,000 (since 80% of €225,000 = €180,000).

Sign the earnest money contract

Once all the numbers align with the bank and you have, at least, the approval of an entity, I recommend that you hurry to sign the earnest money contract. Especially if the property you are trying to acquire is reasonably priced. The earnest money is a private contract between the buyer and the seller that allows you to have a certain security of reservation until you sign the purchase agreement.

To sign the earnest money contract, a transfer of 10% of the purchase price. If the buyer backs out after signing, they would lose that amount. While if it's the seller who backs out of the sale, they should return double the earnest money amount to the buyer. While losing the house of your dreams is certainly disappointing, recovering 200% of the deposited earnest money helps to bear it better.

The risk comes from not knowing what you're doing.

Warren Buffet

You now have all the information to face the signing of your mortgage with more confidence. I hope you can refer to this post when the time comes and it helps you get the most favorable conditions. Although I must warn you that buying a home is not always the best investment for you. It should be a house you can maintain, and its mortgage should allow you to live without too much difficulty.

See you soon and happy reading!