What are the ways to improve creditworthiness before buying an apartment?
A high salary, a large down payment, and a strong credit history are factors that significantly increase the chances of obtaining a positive credit decision from the bank. See what you can do if your financial capacity does not yet allow you to take the loan you need.
Factors Shaping Creditworthiness
Creditworthiness is a term that defines the financial situation of a borrower at the time of applying for a loan. In order to determine the ability to repay the loan on time, the bank conducts a multifaceted analysis to check whether the applicant will be able to repay the entire loan along with interest. Although each bank uses a different methodology in this regard, it is generally accepted that the factors shaping creditworthiness include:
- source of income;
- amount of monthly salary;
- frequency of receiving salary;
- credit history;
- amount of existing credit obligations;
- size of down payment.
Individual banks may consider only a few of the mentioned aspects. However, in the context of creditworthiness, banks typically take into account income levels and financial obligations.
6 Ways to Improve Your Creditworthiness Before Buying an Apartment
The current situation in the banking market makes it easier to obtain a mortgage than it was six months ago. Although inflation remains high, the National Bank of Poland (NBP) has lowered interest rates, resulting in increased creditworthiness for Poles. The "Mieszkanie Plus" credit program introduced last year has also improved the situation in the mortgage market, making new apartments in Wrocław or other large cities more financially accessible for those dreaming of their own home. The current market conditions encourage many people to seek ways to increase their creditworthiness. Below are 6 ways to improve your creditworthiness.
1. Ensure a Steady Source of Income
One of the main factors shaping the ability to repay a loan on time is the level of income. To have adequate creditworthiness, secure a high salary from stable sources. Banks prefer employment under a permanent employment contract. Civil law contracts can also positively influence creditworthiness, but only if they last longer than one year and are of a permanent nature.
Therefore, if you are on a trial period or waiting for a permanent employment contract, it's better to wait until you obtain such a contract.
2. Aim for a Large Down Payment
A successful way to increase creditworthiness is to make a larger down payment when taking out a mortgage. Most banks grant loans if the borrower's savings amount to a certain percentage of the loan. Typically, the capital should be 10 or 20%. The larger the down payment, the better it is for your creditworthiness. Moreover, if you borrow less money from the bank, your monthly installments will also be lower.
3. Build a Credit History
A good way to enhance the ability to repay a loan on time is to build a credit history. This action should be taken well in advance. An example could be purchasing a household appliance on installments and paying it off on time. This builds a credit history that shows you are a reliable borrower. Of course, to achieve a positive impression with the lender, each product should be paid off before applying for a mortgage. Otherwise, the bank will classify unpaid installments as a financial burden, negatively impacting creditworthiness.
4. Try to Reduce Fixed Financial Obligations
Before taking a loan to buy an apartment, it’s certainly worth looking at your finances. Analyze your expenses. It may turn out that some expenses are too high or even unnecessary. For instance, renting an overly expensive apartment, excessive monthly car leasing costs, or a high telecommunications subscription. As a result, too much money may be slipping away from your budget, which could potentially increase your down payment. To improve creditworthiness, it is advisable to cut expenses for several months. Such a strategy can yield significant positive results.
5. Increase Your Income
If, despite a steady income, the ability to repay the loan on time is still uncertain, consider increasing your earnings. A good way is to find additional part-time work on weekends or during the night when you are usually at home. This approach can realistically impact your income. It’s also worth noting that usually, higher earnings are achieved by working one full-time job rather than two part-time positions.
6. Choose the Most Favorable Bank Offer
Each bank offers different lending conditions, allowing you as a customer to check various mortgage offers. The wide selection of different offers makes it easier to choose the option that best fits your individual preferences.
To gain a comprehensive understanding of the mortgage market, it is advisable to meet with a mortgage agent. This professional has access to all available bank offers and can help you choose the most favorable option that meets your credit preferences and type of investment. For example, if you are interested in an apartment in the "Viva Jagodna" estate, which is just a few minutes' walk from Zielony Klin and Brochowskiego Park, the agent will certainly consider the specifics of the property that is to be mortgaged.
As you can see, there are many ways to increase your creditworthiness. By implementing the recommended practices, you will easily obtain a mortgage tailored to your needs. If you are still looking for your dream property, apartments for sale in Wrocław are waiting for you! We warmly invite you to explore our offer.