How Much Money Do I Need to Qualify for a Mortgage?

How Much Money Do I Need to Apply for a Mortgage?

Asking how much money you need to apply for a mortgage may seem like a simple question because one could think, “if I have money, I don’t need a mortgage.” However, it is not that straightforward.

Without the right guarantees, a bank will never grant a mortgage.
Financing is never granted to someone with no income because the credit institution lacks the assurance that the amount lent will be repaid in the future.

The first guarantee that the bank assesses is the applicant’s income, which is well-known.
The applicant’s assets also weigh in, especially when the mortgage is requested for purchasing a property.
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Although there is no minimum income required for a mortgage to be approved and the minimum amount required is not the same in all cases, the applicant’s available income plays a significant role in the approval of the financing.

The general rule is that the bank calculates the mortgage installment, which cannot exceed 30% of the available income.
In the case of a joint mortgage, usually, the income of all co-applicants is taken into account.

Let’s consider an example.
If you have a salary of 1,500 euros, the mortgage installment cannot exceed about 500 euros.
But if you apply for a joint mortgage and the combined income of, for example, a husband and wife is 2,900 euros, the monthly mortgage payment can go up to 950 euros.

However, the credit institution is not so rigid in this regard because it takes into account the overall picture of the situation at the time the mortgage is requested, and the trend of the real estate market may also have an impact.
If the real estate market is on the rise, in fact, even a mortgage that does not comply with the 30% rule tends to be approved, as the guarantee provided by the property is very strong and ensures the repayment of the amount.
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Usually, when applying for a mortgage to finance the purchase of a property, it should be considered that banks provide loans that cover up to 80% of the purchase price (those granting 100% are quite rare).
So, if you buy a house for 200,000 euros, to be granted the mortgage, in addition to the right income to support the installment amount, you must have at least 50,000 euros (considering also the ancillary expenses that come with the purchase).

If you request a mortgage even though you have the money in your current account, savings account, invested in postal savings bonds, or government bonds, it is good to know that the bank will have more flexible considerations: if you own assets that are sufficient to cover the mortgage value (and perhaps you do not want to use them because the returns on investments more than cover those required for the mortgage), then what has been said so far is less relevant, or at least weighs much less because, in part, it is the same assets that guarantee the bank the repayment of the debt contracted.