Step 1: Sort out your finances
You’re looking to buy so you’ll need to get an idea of the amount you can borrow when the time comes. Otherwise, as Tim Clark has pointed out several times in his property column, your dream home could quickly slip through your fingers. Speak to your bank as well as mortgage brokers to find out what conditions (simulations de prêt) they can offer for “Votre Projet Immobiler”. A broker cannot approach a bank that you’ve recently contacted directly about a mortgage. First time buyers may qualify for a part of the mortgage at 0% interest, although you’d still have to pay insurance on the sum.
Step 2: Make a decision
You now have the information to make your decision, taking into account all factors: amount (montant), interest rate (taux) and cost of mandatory insurance (coût de l’assurance). You may find your bank’s offer – which should also include the processing fee (frais de dossier) and security deposit (frais de garantie) – less attractive than a broker’s proposal, even with the additional broker fee (frais de courtage). If you can avoid changing banks it saves the hassle of transferring accounts and payments (prélèvements) down the line (think EDF, Orange, impôts …), but if you are dissatisfied with the quality of your current bank’s service, then it’s worth switching.
Step 3: Mortgage application
Now that you’ve chosen the best offer, don’t dilly-dally. You’re not even halfway through the process and nothing is guaranteed. Whatever lending organisation you have picked, you’ll need to provide paperwork with respect to the preliminary information you provided. Specifically, you have to provide your payslips or other documents verifying your income, your last tax notice, and proof of identity and residence (justicatif de domicile). At this point, you should also be able to provide a sales agreement (compromis de vente).
Step 4: Financing agreement
Once the credit institution has gathered all the documents needed to analyse your mortgage application, it will review your financial situation closely to ensure that it corresponds to the information that you gave at the first meeting. It will then measure your ability to make repayments based on your income, savings and credit rating. (You should be able to cover at least the notaire fees.) If it’s a go, only then will you get what is called an “agreement in principle” (un accord de principe). This is not the final loan offer but you’re close and, more importantly, it assures the seller.
Step 5: Open account
When a bank offers a mortgage (un crédit immobilier), it also seeks to negotiate other products and accounts with you. If the loan is not with your current bank, the new bank will certainly ask you to open a current account (compte et domiciliation des revenues) with them and, depending on the other conditions offered, may ask that you also transfer your Livret A savings account; you may even be required to take house insurance (souscription assurance habitation) with the new bank. In this case, the new bank will assist with the formalities and paperwork.
Step 6: Terms of offer
Following the accord de principe and opening a new bank account to facilitate the loan, you’ll have to wait several weeks for the final loan offer. In that time, the bank sends your file to securities (cautions) and waits for a favourable reply. The drafting (contrôle et édition) of a French mortgage offer is strictly regulated and must contain certain information such as the total loan amount, repayment schedule, precise conditions (mortgage rate, duration ...), the nature of the guarantees, and contact information of the bank, the borrower and guarantors. Finally, this document must specify that you have a cooling-off period (un délai de reflexion) before signing and accepting the offer.
Step 7: Cooling-off period
In mortgage terms, you have an obligatory period of reflection. Thus, you cannot accept the loan offer until the eleventh day following the date of receipt (the offer is sent by regular post, keep the envelope). The offer is valid for 30 days, so you still have twenty days to decide after the mandatory 11 days. When you are sure of your decision, simply return the offer by regular post to your bank along with your signature and the date of acceptance. It’s a good idea to have your conseiller commercial (bank adviser) go through the document with you so that you have signed and initialled (paraphé) the correct pages. (Note: some offers have an additional page asking whether you want subscriptions to magazines, so be careful not to sign up; this is not part of the loan proper.) Meanwhile, the mortgage institution cannot reverse any conditions or ask for any payment, not even the frais de dossier.
Step 8: Déblocage of your funds
After you have returned the signed mortgage offer, you’ll need to send a copy of it to your notaire. The notaire will then provide you with un appel des fonds, a document outlining sums due, including the amount of the mortgage, the balance of the frais d’acte de vente, as well as pro rata for taxe fonciere and avances de trésorie, and in some cases pro rata for coproriéte charges. You’ll need to transfer the money to the notaire just before signing the deed. To do so, you’ll have a déblocage de fonds from your account with your bank. In other words, you release the sums provided for the financing of the property by authorising a bank virement. That’s right, the entire amount of the loan will be transferred into your account and then transferred on to the notaire. It’s not very often you’ll see your bank balance that healthy!
Step 9: Sign acte at notaire
This is the official act established and recorded by a notary by which the buyer becomes the owner of property permanently. It confirms the sales agreement and must be authentic (written by a notary and signed in his presence). Once you and the seller sign, you become the owner of the property and will get an attestation, which you’ll need to set up water supply, electricity, home insurance etc. The titre de propriété (deed) will be sent to you over the coming months.
Step 10: First loan repayment
The month following the signing of the acte authentique of the sale, you’ll pay your first monthly mortgage payment, on a date predetermined with the mortgage provider.