One of the two basic pillars of credit analysis carried out by banks when applying for a mortgage is the analysis of income obtained by the borrower. On its basis, banks estimate the applicant’s financial potential and the probability of stability of their loan repayment in the future.
The most important analyzed parameters are the amount of income, their stability and source. In each case, the applicant must attach a set of specific documents to the loan application. It often happens that during the analysis, the person applying for a loan must provide additional documents, because the ones presented earlier raise doubts of a bank analyst.
Contract of employment
People who earn income under an indefinite employment contract are most desirable by banks. Someone who has such an agreement by definition meets the criteria of stability expected by banks, protected by labor law and confirmed by practice. In some banks, you can apply for a mortgage one month after signing this type of contract. Persons employed under an indefinite employment contract are required to receive the smallest number of documents confirming their income. In most banks, the only document required is the employment certificate completed on the bank’s form, to which the applicant wants to apply. However, if it raises any doubts or in the process of verification of employment, i.e. calling the person employing the applicant something is wrong, very often in the process of analysis the bank expert may request additional documents that will confirm the numbers provided in the certificate.
Required documents include an account statement that is affected by pay
If these data do not match and the account receives a different remuneration than the one on the certificate, the bank may additionally request the applicant to present more reliable documents. These will include any documents that are related to taxes or compulsory contributions paid. So PIT-11 or PIT-36 or a certificate from USD about the basis of calculated contributions. Sometimes the bank may accept RMUA forms issued by the employer or cash receipt receipts interchangeably. The list of possible required documents may be closed by an additional requirement to present a current employment contract or even a work certificate from the previous place of employment. Applicants with a fixed-term employment contract may be treated slightly less well. By assumption, their income is subject to the risk of instability and the possibility of not extending such a contract after its term. Banks most often expect that it has been in force for some time, preferably from 6 or 12 months and its expiry will be no sooner than 6 to 12 months from the moment of registering the loan application. The document requirements are identical to those for indefinite contracts. The only additional document is usually the need to submit a letter from the current employer in which he agrees to re-employ the employee after the current employment period has expired.
In the case of business operations, the analysis is much more complicated. Most often, activity is burdened with low stability of income, although very often it is much higher than standard for employment contracts. However, the banks are carefully observing what the business is about and is looking for rational justification when the inflows and costs are seasonal. To estimate this correctly, the required period of doing business is usually 12 months, although you can often meet the requirements for it to last at least 24 months. As a standard, all registration documents are always required, such as an entry in the business register, NIP and REGON, as well as certificates confirming that they are not in arrears and taxes from USD and the Tax Office. It will always be indispensable to document the income obtained, which is only possible after presenting the PIT tax returns for the previous year, or even two years back and current entries in the book of revenues and expenses. However, this may not be enough. The bank may also request a certificate from the Tax Office on the amount of income and a description of the business activity by the applicant on a special bank form. But this may not be enough. Despite the presentation of the most frequently required account statements, the applicant may also be asked for the opinion of the bank in which he has a company loan for the account and the presentation of proofs of payments for income tax advances or USD contributions paid for the current year. In the case of companies, it will also be necessary to provide the articles of association and any licenses and permits, if any, if they affect the company’s income. With these documents, we still cannot be sure that the bank will not request additional explanations from the accountant or additional letters from the Social Insurance Institution and the Tax Office. As there are several forms of business activity, also the documentary requirements are adapted to their specificity. For example, the lump sum will have to state, for example, what net income it actually has, and with the tax card the Tax Office’s decision on the amount of tax determined for a given year.
Other forms of obtaining income
The above forms of obtaining income are only one of several dozen that can be encountered. In the case of income from other sources, the required documents will reflect the specifics of the income. Pensioners, for example, will have to submit a USD decision to grant an old-age or disability pension. This is an income recognized by banks as more stable than an indefinite contract, and it is enough to become a completely fresh pensioner to successfully apply for a loan. Those receiving income from a specific work contract or mandate contract will have to collect the contracts themselves and bills confirming their net income or tax deductible costs. Dividends survivors will have to prove that they are not incidental. Present financial statements of companies, CIT declaration and resolution of shareholders regarding distribution of profits. In the case of income from the rental of real estate, you will need to provide contracts with landlords and ownership deeds of the rented property. Employees working abroad will have to additionally provide for the equivalents of all of the above documents appearing in the countries in which they obtain income plus a credit report equivalent to the Polish BIK, with the necessity, usually, of all documents being translated by a sworn translator. Any such less stable income must most often be earned for a long time. As longer as better.
A well-prepared mortgage application is a complete set of all required documents, which should not be older than 1 or 3 months on the day of submitting the application.