Getting a mortgage when you have a fixed-term contract is possible


Taking out a mortgage when you have a fixed-term contract is possible, but far from easy photo credit: GettyImages

On the real estate front, interest rates remain at a minimum, which should theoretically facilitate access to the property. However, banks continue to favor permanent contract borrowers (CDI). For employees with a fixed-term contract (CDD), however, buying an apartment or house on credit is very complicated. But not impossible in some cases and for some specific profiles.

Summary:

  • Real estate credit: is a CDI mandatory to obtain it?

  • Knowing how to stay measured in your project

  • Stability and seniority are required

  • Don’t forget to take all income into account

  • A significant personal contribution is always appreciated

  • Bank debts are not accepted

  • Borrowing together is an advantage

  • Having a solid guarantor can make a difference

  • Use a specialized broker

Real estate credit: is a CDI mandatory to obtain it?

Being hired on a permanent contract (CDI) is a real advantage when it comes to real estate. In fact, what could be better than having a recurring and predictable income to reassure a lessor, as part of a rental, or a banker, when it comes to taking out a loan?

For candidates to purchase real estate who commit to long years of repayment, the CDI is therefore considered a real sesame even if it cannot, by itself, guarantee the go-ahead to credit organizations.

CDI: some figures

According to DARES (Direction de l’Animation de la Recherche, des Etudes et des Statistiques), the share of permanent contracts on all activities was 75% in 2019. In ten years, this percentage has decreased by 5 points percentages. However, over a longer period, the share of permanent contracts in the workforce appears to be relatively stable. In the same reference year, 87% of new hires took place with a fixed-term contract. This proportion increases year after year. Indeed, the share of young people “excluded” from access to property is on the rise, which poses an obvious social problem that politicians struggle to understand.

So, can employees on fixed-term contracts (CDDs), intermittent entertainment workers and precarious workers even imagine becoming owners? While they are not immediately excluded from the stone market, their situation is clearly much more complex. And their chance of success is very small. To hope to get a mortgage and then access the property, they will have to present an irreproachable practice and show themselves in their best light.

Loan and CDI

The share of “non-permanent” borrowers continues to decline year after year. According to data compiled by the broker Vousfinancer, only 1.2% of applicants for a loan without a permanent contract managed to obtain a mortgage in 2020. Against 1.3% in 2019 and 1.7% in 2017.

Knowing how to stay measured in your project

When presenting a funding case that is considered difficult, not aiming too high can often be seen as proof of maturity. This is therefore seen by banks as a positive element. It makes no sense, therefore, in this business to want to get the most important real estate financing. On the contrary, too.

Do not hesitate, before filing a file, to evaluate your repayment capabilities in a restrictive way, without giving yourself the slightest gift. And, at the same time and with the same logic, keep the upper limit of real estate prices for the target area. This should lead you to lower your ambitions and thus facilitate your access to the mortgage. Generally, the price of a property depends on its location and surface area. You can then increase your chances of getting a home loan by moving away from highly coveted areas and / or by targeting a smaller area.

Stability and seniority are required

There are four ways to get there. If you have just signed your first CDD, you have no chance of getting a mortgage. Seniority and the stability of your working status are the first elements taken into consideration by credit organizations and banking institutions.

In addition, under a permanent contract, at least three years of seniority in the same position and salary are required. For a bank, this shows that your business sector is recruiting, that you are easily employable and therefore able to repay your loan. This is an essential element, but it may not be enough most of the time.

Don’t forget to take all income into account

All sources of income must be listed in your funding file. As a result, you can have a job that is considered precarious (fixed-term contract, temporary contract), but have other income, such as rental income. Already being an owner is certainly an advantage, because this element reassures the banks. In this case, it is not uncommon to see them “let their guard down”, even at the cost of not respecting the generally accepted maximum debt ceiling.

Alimony must also be included in income, but only if it still has to be paid for a period consistent with the credit repayment period.

The sectors that hire the most on a fixed-term basis and with a fixed-term contract

According to Synergie / Jobfeed, fixed-term employment is very predominant in the following professions: childcare, nurse, caregiver, salesman, maintenance worker, waiter, administrative assistant, green space maintenance worker, life and employees self service. In the meantime, forklift drivers, order pickers, heavy and super heavy truck drivers, conductors, production agents, electricians, maintenance workers, warehouse workers and bricklayers were particularly sought after. The Covid-19 epidemic has had little change in the labor market situation and in the use of fixed-term contracts.

A significant personal contribution is always appreciated

Given the difficulty of obtaining a mortgage when you are hired on a fixed-term contract, having a personal contribution is an advantage that can allow you to make a difference. Your contribution must cover at least 10% of the amount lent, proof that you have been able to manage your budget well and therefore save. Or in order not to squander a donation or an inheritance, even a small one. Obviously, the higher your contribution, the more you will increase your chances of getting a mortgage.

Bank debts are not accepted

In your loan file, some seemingly harmless elements can tip the balance to the good or the bad. Bank accounts treated in this way over time, ie without payment incidents, testify to your seriousness and your ability to manage your expenses correctly. This is a new element capable of reassuring banks and capable of making people forget the “risk” inherent in their status.

Borrowing together is an advantage

Does your spouse have a permanent contract? Taking out a credit for two improves your loan profile. However, your CDD employee status will be observed very closely. In fact, the stability and seniority of your status, the totality of your income, the amount of your personal contribution and your banking history remain discriminatory. Otherwise, your family’s debt capacity will be studied solely on the basis of your spouse’s income. In the case of a “two-headed” loan, don’t make the mistake of being too greedy.

Having a solid guarantor can make a difference

To obtain a mortgage, banks need to be reassured about their borrowing capacity. Even if your profile stands out, having a guarantor is something that can help you make a difference. So, in the event of your one-time non-refund, the latter will replace you. Obviously, your guarantor must show a very solid and much better profile than yours.

Use a specialized broker

If you are hired with a fixed-term contract, it is also advisable, for greater efficiency, to contact a specialized intermediary rather than embarking on a “banking tour” with your own practice under your arm.

Indeed, this mortgage specialist will be of great help to you at all stages of your journey. Firstly because he will be able to identify the weaknesses and strengths of your loan profile, which will ultimately allow you to improve the content of your file. And maybe even change the search criteria (location, area). In constant contact with credit institutions, he will know which bank to direct you to and will open the doors for you. Attention, the last word in terms of real estate credit obviously belongs to the lender, that is to say the bank.

A hardening of the concession conditions that falls badly

From 1 January 2022, banks will be forced to be more rigorous in granting loans. Obviously, this won’t do any good for more fragile files like those filed by fixed-term employees. The recommendations of the High Council for Financial Stability (HCSF) on mortgages must be strictly observed on this date. Furthermore, any violation will expose lenders to penalties. Banks will have to expressly ensure that the monthly installments do not exceed 35% of the borrower’s income for a duration of the loan which must be less than 25 years (27 years in the case of a new purchase). These “good practices” were previously the subject of simple recommendations, which have led many establishments to get rid of them.

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