A mortgage creates a serious financial burden on the family budget for many years, and the lending bank must be confident that the borrower is able to fulfill its obligations.
When assessing a client’s creditworthiness, financial institution specialists focus on the client’s employment and income level. It should be enough to pay off the debt without disrupting the payment schedule.
What income of a mortgage borrower will the bank be satisfied with?
If you want to take out a mortgage loan, you need to be prepared for a strict assessment by the bank of the main indicator of solvency - income. However, there are no uniform regulatory requirements for its minimum acceptable value. The calculation is carried out separately for each borrower, taking into account dozens of indicators, including the cost of the purchased home.
The same logic applies to mortgages as to other credit products: the higher the income, the greater the chances of approval of the application. At the same time, there is a significant difference - the numbers are completely different, so earnings at the minimum wage level will not work. It is also necessary to make a down payment, which can be 10-20% of the cost of the apartment. However, there are banks that provide mortgages without a down payment.
Lenders must take two circumstances into account when calculating a mortgage:
- The percentage of income is determined, a multiple of which the credit limit is set. There are no general figures for the market, since much depends on where the property was purchased. For apartment buyers in Moscow or Sochi, earnings requirements will be more stringent than in Kurgan or Orenburg due to the higher cost per square meter. The type of object matters (a new comfortable apartment or an old Khrushchev building), as well as the area of the city.
- Many banks use the liability/income ratio. It represents the ratio of all mandatory expenses of the client to his total income for the same period (less taxes). With its help, the share of expenses in the client’s family budget is calculated. The perimeter of mandatory costs includes:
- education;
- maintenance of dependents; alimony;
- insurance;
- rental housing;
- obligations under existing loans.
Allowable coefficient values are used by each bank individually. On average in the market, the amount of mandatory expenses should not exceed 45-65% of the total income of a potential borrower, although there are larger exceptions to this rule. You can make accurate calculations using a loan calculator .
In 2020, Sberbank clients can apply for a mortgage loan if they have a net income of 40 thousand rubles per month. This amount does not include all mandatory expenses.
What are they looking at in the bank?
One of the first questions that arises before taking out a mortgage is what your salary should be to get approved. Many today work unofficially, are financially secure, but cannot confirm their income with a 2-NDFL certificate. Others are officially employed, but their wages are low. What to do in this case?
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The fact is that many financial organizations, in addition to salary, consider the applicant’s income such as:
- Profit from part-time work
- Dividends from rental housing
- Insurance payments and others.
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Some lenders accept the so-called “gray” salary, that is, when the client confirms part of the income with 2-NDFL, and the second part with a free-form certificate. As for large banks, they consider only officially confirmed income.
When accepting documents from the applicant, the lender checks the creditworthiness: credit history and profit margin. If the client provides a certificate in free form, then in most cases he will receive a refusal.
If he has an ideal credit history and positive experience of cooperation with banks in the past, then the chances of approval increase. Clients with a bad credit history and low salary have practically nothing to count on, but you can try to improve your file. Read about how to do this here.
When issuing a mortgage, the bank wants to be confident in its consumer, so official employment is an important point. In which case the creditor will not be able to recover money through the court if the client receives a “gray” salary.
How does the coefficient work?
If you receive 80,000 rubles and pay 20 thousand of them in alimony, pay 17 thousand for a car loan and pay another 20 thousand rubles for a mortgage, the “liability/income” ratio will be 71%, which is critical and most banks will refuse to issue a loan.
With an income of half as much, there is a high probability of approval of the application if there are no mandatory expenses and the monthly payment is 14,000 rubles. In this case, the coefficient is only 35% and the chance of a positive decision by the lender remains high.
Minimum salary to get a mortgage
So, what salary should be in order to take out a mortgage loan to buy an apartment? The minimum confirmed income must allow the obligatory monthly mortgage payment to be made, which in turn should not exceed 40% of the borrower’s income. It is possible to calculate the approximate amount of the minimum income to obtain a mortgage loan only with an annuity payment system - the amount of the monthly payment is constant throughout the entire loan term.
In order to determine the approximate salary amount for obtaining a mortgage, consider the following example:
- mortgage loan amount - 1 million rubles;
- contract duration is 20 years;
- annual interest - 10%.
Having performed the calculation on a mortgage calculator according to the above data, we will get the approximate amount of the monthly payment - it will be 9,650 rubles. Next, we calculate the required salary - (9650 × 100) ÷ 40 = 24125.
It turns out that to conclude a mortgage agreement on the above conditions, a confirmed official income in the amount of 24,125 rubles is sufficient. Of course, the amount of wages is not the only significant criterion when assessing a borrower. For the purposes of this article, we will consider it exclusively.
The above limiting indicator of mandatory payment relative to monthly income of 40% is far from constant. Quite a large number of banks allow this ratio to be 50 or even 60%. The figure of 40% is given as the most optimal. With this amount of monthly payments, the client will feel more comfortable if any unexpected expenses arise.
If the mortgage is taken out by a family?
In such a situation, the bank considers the total income of all family members. The difference between it and all debt payments (including mortgages) should not be less than the minimum wage for husband, wife and children.
However, there are circumstances that affect the final calculation:
- if there is a minor child, the costs of his maintenance are deducted;
- benefits and other social transfers are added to income;
- if one of the spouses is dependent on the other, the amount of the mortgage loan may be reduced.
Mortgage with two identity documents
Some credit institutions provide their clients with the opportunity to obtain a mortgage using two documents. The first of them is a civilian passport, but the second can be a foreign passport, military ID, or driver’s license.
With such a loan, the borrower will not need to confirm his income. The decision to issue a mortgage is made quite quickly in this case.
But you should be prepared for the fact that the rate and down payment will be significantly higher.
In addition, additional restrictions may be introduced on the age of the borrower and the repayment period of such a loan.
Methods of income verification
If you want to get a mortgage, you must document your earnings. A number of financial organizations, for example, Alfa-Bank, require this to be done using a bank form, which can be downloaded on the official website. The document indicates the average monthly income after tax for the calendar year. If your work experience is less, information about earnings for the time actually worked is provided.
Other financial institutions, including Sberbank, in addition to the document in the bank form, consider certificates of income and tax amounts of an individual in form 2-NDFL for the last 12 months.
Documents are submitted to the bank in original.
Documents certifying employment are also required:
- photocopy of the work book;
- extract from employment;
- a certificate from the employer with information about the position held by the borrower and his work experience;
- a copy of the contract/agreement from the last place of employment (for individuals for whom the legislation of the Russian Federation allows for the absence of a labor document).
What types of income do banks take into account?
In addition to earnings received from the main place of work, banks take into account additional sources of budget replenishment, which also need to be documented:
- pensions assigned for old age, disability, due to the loss of a breadwinner;
- income from the activities of individual entrepreneurs without forming a legal entity;
- part-time worker's earnings;
- remuneration from the use of intellectual property;
- income from hiring/renting residential or non-residential premises;
- remuneration received under civil contracts.
Sberbank clients do not need to document insurance compensation, alimony, scholarships, profits from investing in securities, winnings, penalties, donor fees and a number of other types of income.
Financial institutions use a complex scoring model to assess the creditworthiness of customers. It takes into account hundreds of indicators that are automatically processed by a computer program. Each borrower is assigned a certain scoring score (the nominal value depends on the type of scoring).
The reliable financial position of a citizen is evidenced by the ownership of movable and immovable property:
- automobile;
- land plot;
- garage;
- own business;
- garden, dacha.
The creditor’s confidence is increased by the client’s in-demand profession, significant work experience at his last place of employment, as well as the presence of a higher education.
Is it possible to get a mortgage with a “gray” salary?
If you have questions about mortgage lending for citizens with a “gray” salary, it means that the employer pays the bulk of the earnings in an envelope. In this case, only a smaller share of income can be confirmed with the help of certificates. However, if this is not enough to purchase the desired apartment, refusal will most likely follow. Involving a co-borrower or guarantor can increase your chances of getting a loan.
There are other circumstances - a person is not officially employed anywhere, but has a constant income from freelancing or works in some field as self-employed. Here, too, the chances of getting a loan are low. Even having a deposit and the ability to pay the entry fee doesn’t help.
It is possible to convince a financial institution of solvency by alternative means. Among them are a rental agreement, a bank account statement, and a tax return. However, there is no guarantee that these confirmations will be accepted.
The banks' arguments are clear - unofficial work can be lost at any time and for the lender this is a huge risk. Having an open account also does not guarantee anything. The client has the right by law to withdraw the money at any time, including if there are financial obligations under the mortgage. At the same time, lenders have a positive attitude towards such sources of income if they act as additional to the confirmed main one. Sberbank doesn’t even require the relevant documents, although you must clearly explain the origin of such income during the call.
If you are seriously engaged in freelancing, and it brings in income that meets the requirements of banks for mortgage lending, registering as an individual entrepreneur would be a good solution. If the work is successful, after 1 or 2 years (the period depends on the conditions of the lender), you can get a mortgage by saving up for a down payment.
How to get a mortgage with a small official salary: the main methods
Below are the main approaches by which you can easily get a mortgage with a small official salary:
- If you are in a marital relationship and your spouse works officially, it makes sense to draw up an agreement specifically for your spouse. This approach is appropriate if your husband (wife) earns much more than you.
- Since banks ask to present a certificate confirming the level of income in free form, you can present not a certificate, but an extract from your own bank card, to which funds are regularly received. This method is suitable for those who do not work officially and receive money on the card from other sources, for example, not only from the main employer, but also from customers (if you are freelancing). You can get a statement from your bank the first time you use your passport.
- Does your relative have a stable and fairly high income, which is confirmed by relevant documents? In this case, you can involve him as a guarantor: in most cases, banks do not refuse such a request (see Average salary in Russia, in the regions!).
- Modern mortgage programs offer flexible lending terms. This means that if your down payment is 40 percent or higher, you won't need to prove your income. Don't have enough money for such a high down payment? In this case, you can use a regular consumer loan, which can be taken from any bank. Please note: this method is only good if you have no doubt about your solvency and can repay the debt on time.
What to do if you don't have enough income
Co-borrowers
Solving the problem of improving housing conditions can be seriously complicated if the official income is insufficient to make monthly mortgage payments. In this case, co-borrowers are often involved. They are jointly and severally liable to the creditor bank along with the main borrower. The financial organization has the right to demand repayment of the debt to all persons specified in the agreement.
The co-borrower may own a share in the purchased apartment or may not have any legal connection to the housing. Any of these statuses implies liability to the bank in the event of the failure of the main borrower to fulfill obligations. In practice, lenders attract 2-3 co-borrowers, who are close relatives. When carrying out solvency calculations, the financial institution takes into account all participants in the transaction.
The law requires the involvement of a spouse as a co-borrower if the mortgage loan is issued to a person who is officially married. Sometimes housing is registered for a minor child. In this case, parents or other solvent relatives act as co-borrowers.
Surety
Another guarantor of mortgage lending is the guarantor. If the co-borrowers are mainly relatives, the guarantee can be issued to strangers and legal entities. The earnings of co-borrowers are taken into account when calculating the amount of the mortgage loan; the guarantor acts as a guarantor and does not affect the size of the loan.
The guarantor does not claim ownership of the residential property for which he assumes responsibility. The co-borrower has a personal interest in the transaction and if the main borrower refuses to pay the bills, the lender has the right to foreclose on this person. If obligations are fulfilled in good faith, the mortgaged apartment or house can be completely re-registered in his name. The guarantor will not be able to do this and will only be able to recover expenses from the borrower in court.
Income is the main indicator when deciding whether to grant a mortgage loan. If it is stable for at least a year, documented, and its size is up to 40-45% of the monthly payment amount, the likelihood of obtaining a mortgage is very high. In other cases, other circumstances play a role, including additional income, as well as the involvement of co-borrowers and guarantors.
Several ideas for extra income for people with a small salary
If you are determined to find a second job to obtain a loan, try to ensure that your earnings do not interfere with your main work activity. Moreover, it can be either official or unofficial; you just need to declare your income so that the lender is convinced of your solvency.
There is no need to reinvent the wheel: you can work on ready-made ideas that are guaranteed to generate income. Engage in dacha farming that generates profit, raise pets or write reviews of products on the Internet - everyone can find something they like that will provide additional income (see Additional income - how, what and where to find it), so interesting creditor.
So, low-income mortgages are a possibility. There are always several ways in which you can conclude the desired contract; the only important thing is that you have an additional source of income that will allow you to repay a fairly large loan to purchase real estate.
