What documents does your bank require for a property loan?

For most people, buying a property is the biggest investment that they will make in their lifetimes. A property loan is often needed for the purchase.

You can learn everything you need to know about obtaining a loan in our blog post on the subject.

Loan collateralization and overview of assets

If you want to apply for a loan to buy a property, you will first need to present some facts, figures, and data to your bank.

The borrower’s income and expenses will both be taken into consideration and analyzed to determine his or her creditworthiness.

Finally, the potential lender will calculate whether the borrower is in a position to repay the estimated loan installments regularly and permanently (including interest and principal repayments, also called “annuity”).

Self-employed and employed borrowers — what are the differences?

Banks distinguish between self-employed and employed borrowers by classifying the nature of their income.

A business owner is always classified as self-employed. Banks generally regard self-employed persons as higher-risk borrowers because they do not have a regular income in the form of a fixed salary.

Employed persons are all those who are in an employment relationship subject to social insurance contributions, i.e., who have a regular job. These employees usually hold a position based on a regular employment contract, which makes it easier for the lender to assess their future income.

What documents about the property are required?

The lender wants to know as precisely as possible what property will be financed with the loan.

The following documents and records must be submitted in every case:

• House ancillary cost statements (with types and amounts of costs)
• Building description
• Site plan of the property
• Cadastral map
• Land register excerpt
• Determination of the construction sum (including types and amounts of costs for new buildings)
• Official permits
• Leases (for rented properties)
• Declaration of partition for condominiums
• Construction plan

Presentation of proof of income

The lender will want to know precise details about the applicant’s income situation so that it can keep its own financial risk as low as possible.

Satisfying this requirement entails presenting the employment contract and a detailed list of any and all additional income (if any). The spouse will often be required to present the same information as well.

Self-employed persons will also be required to submit a statement of revenues and expenses or a balance sheet.

Also necessary: records of expenditures

In addition, disclosure of all regular expenses such as rent, insurance premiums, or living expenses is required.

Meeting these requirements is in your own interest as well, and no expenses should be forgotten so that an accurate plan for financing the property loan can be prepared. 

Examination of assets and liabilities

The next step is to determine what assets and liabilities you as the borrower have. Assets such as building loan agreements or securities will be included.

As soon as the bank has all the necessary information, it will review the material and determine whether you are approved for a loan and, if so, at what terms and conditions, which will be dependent on your personal and economic situation.

Our tip: Careful preparation of the loan application makes a strongly positive impression on most banks and can save you a lot of time. Your best approach is to collect all the required documents in advance.

We wish you all the best!

Would you like to buy or sell a property in Kaiserslautern and the surrounding area?

If you are thinking about buying or selling property in the Kaiserslautern area, please feel free to contact us at 06301 31140, or simply fill out the contact form below. We will be happy to advise you and answer any further questions you may have.