Employment contract, business or garbage truck? Which contract is the easiest to get a loan? It turns out that the form of employment does not preclude applying for a housing loan.
Formally, anyone who legally earns income can apply for a home loan. Theoretically, any source of income will be accepted, but in practice the easiest way to get a loan is for people employed full-time, conducting business activity and employed under mandate or specific work contracts.
Contract of employment
In the case of an employment contract, the period of employment is primarily important. The ideal solution will be work based on a contract of indefinite duration, but it cannot be a contract concluded just a few days ago. Banks usually require employment for a minimum of 3 months and income is usually taken into account for such a period. Of course, in the case of a shorter period, exceptions are possible, e.g. in the case of a smooth change of work, employment in a company from the same industry, etc. A loan in this case is also possible, but the terms of the contract are much more restrictive. Working for a definite period, the contract must apply from a minimum of 6 months, although in a large number of banks this requirement is extended to up to 12 months. The agreement may not expire before the minimum period of 6 months, but we must be aware that some banks will require 12 months.
It is also important to realize how the bank will calculate the income accepted for analysis. Most often it will be the average of the last 3 months. However, if we received a raise within this period and the amount from the employment contract is higher, sometimes it will be possible to accept a higher salary. Particular attention should be paid to remuneration components such as bonuses, commissions or rewards. This part of the remuneration may be taken into account only if the bank decides that they are stable and are paid relatively regularly.
Also people running a business can apply for a housing loan. As a rule, business operations must be conducted for a minimum of 12 months, but remember that some banks will expect a period of twice as long. In the case of settlement on general principles, the basis for calculating income is the Revenue and Expense Book and the PIT tax return for the past year. Sometimes, however, the bank may want to check the income for an even longer period and ask you to provide PIT for the next period. Based on these documents, the average income is determined. Most often it is calculated as the average from the last 12 months or the average for the current and past year. Remember that when calculating capacity, income is taken into account, not income from business operations. In addition, the bank is also examining the so-called income stability. This means that the income level is verified in individual months. Of course, it does not have to be identical, but it should not differ significantly from the average, or explain why this difference results.
A similar period will be analyzed when the entrepreneur pays a lump sum on recorded revenues. Also, it will be at least a dozen or so months, but in this situation only income is taken into account. Banks will treat a specific part of this income as net income, depending on the type of business. It will be an amount of 10 to 40 percent of revenue, i.e. in a situation where the entrepreneur achieved annual revenues of 120,000 dollars for analysis will be from 12 to 48 thousand $ as annual income. Similarly to the Revenue and Expense Book, stability is analyzed. It is unacceptable if the majority of revenues were achieved, e.g. only in 2 or 3 months.
A rare situation is the settlement of taxes by a tax card. Only a small group of entrepreneurs can use this form, but they can also theoretically apply for a housing loan. In practice, however, this can be difficult due to the small amount that the bank will calculate. Multiple tax rate is assumed as net income. As a rule, this rate is multiplied by 6 or 8 and this means that the theoretical net income calculated in this way rarely exceeds $ 2,000. This allows you to get a relatively small amount of credit.
Contracts and work
People who earn on the basis of mandate and specific work contracts can also apply for a loan. In such cases, it is necessary that the employment period be a minimum of 12 months. From this period, income will be taken into account when calculating creditworthiness. In the case of civil law contracts, however, you must remember that banks will rarely take into account the entire amount that is paid to us. Net income will be calculated according to the tax ordinance, taking into account 20 or 50% tax deductible costs. Some banks, however, use their ratios and use e.g. 80% to calculate creditworthiness. amount paid out. We must remember that not all the amount that affects the account is recognized as net income.
Let us remember that not only full-time employees can apply for a housing loan, but also those running a business or employed under civil law contracts. If the income is high enough, the form of employment does not preclude applying for a loan.