A financing confirmation or financing commitment is a bank’s declaration that the customer meets the requirements for a loan and that the bank is willing to grant it a loan. The commitment enables the customer to demonstrate that he can finance a property – for example a property – even before the loan agreement is concluded. The financing commitment is not binding, but gives buyers and sellers security when signing the purchase contract. At CredVine Lending you can find out more about the financing confirmation and how to get one from your bank.
The purpose of a funding commitment
In most cases, anyone wishing to buy a property must prove that they can also pay for it. Because if the buyer signs a sales contract without having secured the financing, this is disadvantageous for everyone involved. After all, it could happen that the buyer doesn’t have one Receives credit from his bank and owes the seller the price of the property. For this reason, it makes sense to have a financing confirmation issued. The bank certifies that it is ready to grant a loan to its customer.
Is a financing confirmation required before buying a house?
Most real estate dealers insist that prospective buyers provide them with a financing commitment. This protects you from insolvent buyers and the time-consuming re-processing of failed purchase contracts. There are binding and non-binding financing confirmations. However, the fact that the bank issues such a certificate indicates in both cases that the prospective buyer has sufficient creditworthiness.
Important: Always have a financing confirmation issued before you sign the purchase contract for a property. It is even better if the loan agreement already exists at this point. Only then can you ensure that your property is financed.
Checklist: You need this for a financing confirmation
If you need a financing commitment, you can make an appointment with your house bank or another credit institution. On CredVine Lending, homebuyers and builders can submit a financing request to our partner MoneyHype Finance. MoneyHype Finance can make an assessment of the financial feasibility in a personal appointment, which can be presented to estate agents or sellers when viewing the property.
By the date you should gather all the necessary documents. This includes:
- Price of the property: Tell the bank the price of your desired property and the share that That Should cover loans (which is therefore not covered by equity). If you do not yet have a property in view, state the maximum price that you are willing to pay. You can find your maximum portable price in Determine budget calculator.
- Real estate data: Provide the bank with information on the size, location and condition of the property. You can present an exhibit or blueprints, take photos or bring an extract from the land register.
- Evidence of equity: Include evidence of equity in your documents, for example in the form of account or deposit statements.
- Other collateral: If you have other collateral, please provide it as well. This can be, for example, another property or one Trade life insurance. This shows the bank that it is not taking any risk with you.
- Proof of income: Proof of your income assures the bank that you can pay the monthly installments for the loan repayment. Ideally you have been employed for at least six months.
- ID card: You may need your ID card to identify yourself. If you visit a bank that does not know you yet, identification is required in any case.
Bank customers whose documents are complete have the best chance of obtaining a confirmation of financing. Specific information about the property is also helpful. Anyone who has no prospect of a property can only expect a non-binding financing commitment. It usually takes a few days, sometimes a week or two, to issue the document.
Without guarantee: the preliminary financing commitment
A preliminary financing confirmation is not binding. The bank is only expressing its fundamental willingness to grant the customer a loan. Especially if the documents are incomplete or no concrete property is in sight, prospective buyers receive such a preliminary financing commitment. In the end, the credit institution was still unable to convince itself that all the requirements had been met. The bank usually communicates this by stating in the certificate what a positive promise it still lacks.
A non-binding confirmation of financing, for example, could be formulated as follows: “We hereby confirm that, subject to a final credit check, we are happy to provide you with the necessary loan funds for the purchase of the above property (purchase price: $ 320,000). “
When is a financing confirmation binding?
Anyone who has received a provisional financing commitment must sign the loan agreement in the next step – only then will the loan commitment be binding. A binding confirmation of financing prevents you from getting the loan after all. However, very few banks issue one; As a rule, real estate traders only need to submit a non-binding promise. If the customer has prepared all the documents and the bank has no complaints about their creditworthiness, it can also issue a binding financing commitment.
This is how a legally binding confirmation of financing could be formulated: “We hereby confirm that we will provide you with the necessary loan funds for the purchase of the above-mentioned property (purchase price: $ 320,000) at framework conditions to be agreed. “