In most cases, you need a financing confirmation when buying a house before the realtor reserves the property for you or makes an appointment with a notary. If the confirmation is binding on the part of the bank, there is also talk of a financing commitment. From a legal perspective, however, this is not yet the loan agreement, even if the bank also gives an oral commitment for the investment. This article tells you what you should know about it beforehand.
What is the financing confirmation?
The financing confirmation for the house purchase states that the bank is ready to make the investment and to provide financial support for the house purchase. Thus, the bank has already carried out a credit check beforehand. The potential buyer should know that the confirmation of the financing, despite its name, is usually binding, but not legally binding. Only the contract signed by the bank and the contractual partner, i.e. the home buyer, can be regarded as a binding confirmation of financing when buying a house. Nevertheless, the financing confirmation is very important when buying a property. With the confirmation, the owner and seller, as well as his commissioned broker, have a basic security. This ensures that financing is possible in principle and that the interested party has dealt with this topic of buying a house.
Is a financing commitment necessary when buying a property?
According to the legislator, there is no need or obligation to obtain a financing confirmation before buying a house. But a potential buyer should know that the bank's binding commitment represents a high level of security. If the notarized contract is signed without the bank providing security, the buyer remains bound by the contract. The buyer cannot simply withdraw if the bank rejects his financing request that is only now being made. For the owner, the presentation of the financing confirmation also proves that the buyer is a solvent and that the necessary creditworthiness is given. In addition to the financing commitment from the potential lender, many broker offices require additional information from the Schufa . Here, too, the interested party should be cooperative and obtain the required documents. The fact is that the bid is awarded to the buyer whose documents convince the owner most and with whom the deal is apparently the safest.
What do you need in order to get financing from the bank?
Before deciding on a lender, you should first compare the loans . In order to receive a binding confirmation of financing for the house purchase from the bank, you should send all necessary documents in full to the lender. The following documents are absolutely necessary for a financing confirmation when buying a house.
- the cost of the property (ideally with the synopsis)
- all known data about the property
- Proof of income
- For self-employed and freelancers: Tax office notices from the last two years, plus current BWA
- Evidence of equity
- Evidence of the collateral for the loan approval
- Identity card and proof of a valid place of residence in Germany
A binding confirmation of financing when buying a house is only possible if all the required documents are submitted in full.
Is a financing confirmation binding?
Anyone who receives a financing confirmation for the house purchase from their bank can be relatively sure that the bank really supports the project. However, one should know that the commitment alone is not a binding confirmation of the loan approval. Should inconsistencies arise in the course of the credit check or when looking through the documents, the bank can reject the financing application for the property. This reaction, which is usually unexpected for the applicant, can also occur if, as part of a property inspection, it emerges that the real value of the favored property is significantly below the price demanded by the owner. The wording on the financing confirmation is an important point of reference for binding force.
If the bank writes that the confirmation or promise is binding, the potential borrower can generally assume that the lender will not withdraw. If, on the other hand, the confirmation of financing for the home purchase is marked “after initial assessment”, the bank releases itself from any liability and the broker will not consider the confirmation to be a secure promise.
The financing confirmation can be crucial for buying a home
The promise gives the owner a security. But the financing confirmation is even more important for the potential buyer, who can only guarantee compliance with the contractual agreements with the security of an investment transfer from his bank. Most credit institutions issue the confirmation free of charge, so you shouldn't hesitate. Even if not all brokers ask for this confirmation before the notary appointment: The common practice when buying a house is to present the financing confirmation!
1 Adaptation of living space: This is what the long-term care insurance pays (as of: 27.08.2020)
2 Age-appropriate renovation - loan 159 from the KFW
My name is Martina Lange and I prefer to write journalistic texts on the topics of finance and medicine. I also love to write professional articles of all kinds. I can find my way into almost any topic and am always happy when I have even more knowledge after finishing a text. As a freelance writer, I am passionate about writing for creditSUN.