Predictions are difficult. Nevertheless, banks dare to take a look into the future before financing construction. Your crystal ball is called a credit check.
Anyone who wants to buy or build a house usually needs a real estate loan. Banks are happy to provide it – provided the future owner can pay off the loan in the next 10 to 30 years. That’s how long the term is for most real estate loans. As part of the credit check, the bank checks whether you are creditworthy. So whether you will be able to pay back the borrowed money in the future. To do this, she wants to get an accurate picture of you. This picture is composed of different puzzle pieces. You can find out what these are below.
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Which criteria influence creditworthiness?
The focus of the credit check is the household bill. The bank advisor compares your income and expenses. This way he can better assess whether you can afford the monthly rate. He also wants to know if you are making child support payments and if you have any other loans to service. The lender will also ask about your long-term life plans. Would you like to have children? Or are you toying with the idea of a career change? All of this affects your financial situation and thus the real estate loan.
The advisor also looks at your place of residence during the credit check. If you live in a structurally weak region with a high unemployment rate, this can have a negative impact on your construction financing. The so-called geoscoring often leads to a rejection of construction financing.
Also interesting: The 7 most common pitfalls in real estate loans
Why does the bank ask for marital status and age?
Because both affect your credit score. Working couples have the best chance of getting mortgages. Two incomes make financing much easier. Singles and single parents, on the other hand, have a harder time. You need other convincing arguments, such as a high monthly income and an impeccable credit bureau. The same applies to borrowers over 50. Some banks are skeptical whether the borrower can pay off the property until retirement age. On the other hand, older applicants often have more equity. You can always score with this.
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What role does Schufa play in the credit check?
The Schufa information is only one piece of the puzzle of many when it comes to real estate financing. Sometimes, however, she can tip the scales. Because a negative entry does not make a good impression. It says something about the applicant’s payment behavior. Sometimes borrowers don’t even know about their Schufa entry. Read here how you can avoid nasty surprises and get a construction loan despite Schufa.
Credit check – what documents does the bank need?
The bank needs your help with the credit check. You should have the following documents ready:
- asset statement
- Copy of permanent employment contract
- Salary or income statements for the last three months
- Proof of additional income (e.g. rental income)
- Proof of regular monthly expenses
- if applicable, copies of existing credit agreements
- identity card
How does the bank deal with existing customers?
Reliable existing customers have a clear advantage when it comes to lending. Because the bank already knows the other party. This helps her with the risk assessment. For example, it looks at how long you have been a customer and whether you have always paid your installments on time. These internal evaluation criteria influence the so-called rating, i.e. your credit rating. However, a good rating alone is not enough to get a commitment to finance your property.
When is the credit rating sufficient for a loan?
You can’t give a general answer to that. In order to be able to assess your creditworthiness, the bank determines a so-called creditworthiness score. Basically, the higher the score, the better your credit rating. A high score makes it easier to approve a loan and leads to attractive interest rates. But: Every bank has its own rating system. And lending does not depend solely on your credit rating. The bank will also take a closer look at your dream home. The market value and the mortgage lending value of the property are decisive.
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