Preparing for a mortgage: what the bank looks at

Four questions, one aim: can you repay?

Behind every loan application, the bank is trying to answer one simple question: will you be able to repay, even if your income falls? To answer it, it looks at four things: your debt ratio, your disposable income, your savings and deposit, and the stability of your income. It adds a fifth, less well known but decisive: how your accounts have behaved over the past few months.

Each lender has its own scoring grid, and the same application can get different answers from different banks. The aim is therefore to present a clear profile with no grey areas, rather than to chase a single number.

The 35% debt ratio

The debt ratio is the proportion of your income that goes on loan repayments. Since 2022, France’s financial stability council (the Haut Conseil de stabilité financière) has required banks not to go above 35%, borrower insurance included. The calculation covers loan repayments, including the new loan, as a share of net income before income tax. Banks may make exceptions, but only for a small proportion of applications.

Example: with €3,600 of net income, 35% means a maximum of €1,260 in monthly repayments. If you already repay a €200 car loan, that leaves €1,060 for the mortgage. At 3.5% over 20 years, €1,060 a month lets you borrow about €182,800, insurance not included. Your current rent does not enter the calculation, since it will disappear once you buy.

Disposable income after the monthly repayment

The debt ratio says nothing about what is left over in the month. Two households at 35% are not in the same position if one has an extra child. Hence the attention paid to disposable income, calculated once the repayment is paid and the usual costs deducted.

There is no official threshold: the rules of thumb professionals mention vary from bank to bank and rise with household size. Work out your own before you view a property, using the target repayment rather than your current rent.

Savings and deposit

A deposit reassures the bank, but above all it pays for what the loan does not always cover: notary fees, around 7 to 8% for existing homes and 2 to 3% for new builds, and guarantee fees. On an older property at €250,000, notary fees come to €17,500 to €20,000.

Many banks ask for a deposit of around 10% of the price, though it is not a rule. Above all, they look at what you have left after the purchase: a deposit that empties all your accounts is a worry. Keep the equivalent of three months of spending in reserve, untouched, after you sign.

Income stability

A confirmed permanent contract (CDI), beyond the probation period, is the simplest case. A civil servant is also viewed favourably. For a freelancer or business owner, the bank relies on the last three sets of accounts and looks at how regular the income is; for a fixed-term contract (CDD) or agency work, on length of service and continuity of assignments.

Avoid changing job or status just before you submit your application, and flag foreseeable changes, such as a promotion or parental leave, rather than letting the bank discover them.

The last three bank statements

The bank generally asks for statements covering the last three months, sometimes six. It reads your daily life in them: overdrafts, rejected direct debits, consumer loans, gambling spending, how regularly you save. A standing order to a savings account, visible every month, works in your favour.

Three to six months before applying, tidy up these accounts: no overdraft, no rejected payment, no new loan. Prepare the rest of the file too: your last three payslips, your latest tax notice, proof of identity and proof of address.

• Clear or reduce small loans before you apply.
• Make a regular savings transfer, even a modest one.
• Compare offers using the APR (TAEG) and the total cost, not the monthly repayment alone.