How to know how much you need to finance your own home – 09/20/2024 – Market

Buying your own home requires study and planning. For those who are going to finance the purchase, extra care needs to be taken, after all, it is the family’s longest-standing debt. It is crucial to calculate the income needed to guarantee credit approval and ensure that the financing fits within the budget. Ideally, this calculation should be done before choosing the property.

“Consumers rarely arrive at sales offices knowing how much they can finance. This is very rare. Companies, whether developers or real estate agents, have spreadsheets that make calculations easier for consumers based on X down payment and Y installments. These simulations help consumers make purchasing decisions,” says Fábio Tadeu Araújo, CEO at Brain Inteligência Estratégica.

Loft’s real estate credit director, Talles Dantas, says that it is a common Brazilian behavior for buyers to analyze financing details more at the end of the transaction than at the beginning. This often causes greater stress during the purchase process and frustrations with credit denials.

In the United States, according to him, the client generally goes to the bank first, understands their purchasing power, and then looks for the property.

The general rule is that the value of the financing installment should not exceed 30% to 35% of the buyer’s or family’s gross monthly income. This ensures the financial capacity to pay the installments without compromising the budget too much.

It is also necessary to consider other costs related to the acquisition of the property, such as deed fees, ITBI (Property Transfer Tax), insurance and maintenance and condominium expenses.

“Those who pay rent already have a very good basis for knowing how much they can pay in installments, because it is already in the budget. Now, if they do not pay rent and are going to have this commitment, the person has to study their income and financial commitments very carefully so as not to get into trouble and end up losing the property”, says real estate credit specialist Murilo Arjona.

The way to find out how much you can invest in purchasing a property is to simulate the payment. All banks that offer mortgage loans have simulators, as do many construction companies and real estate agencies.

The tool is available online and is usually free. Through simulations, it is possible to estimate the value of the financing installments, considering the value of the property, the down payment, the financing term and the interest rate.

“In the property advertisement published on Quintoandar, customers can simulate financing in which, based on the property’s value, they include how long they would like to pay it off and how much they are willing to pay as a down payment,” says Eduardo Alves, commercial head of the property sales and rental platform.

The down payment is usually at least 20% of the total value, but may vary depending on the contract and the financial institution. The higher the down payment, the lower the installment value and, consequently, the lower the income required to secure financing.

After simulating financing options, the future buyer can go to the bank that offers the best advantages to request credit approval. The financial institution will evaluate the credit history, proof of income and job stability. If everything goes well, it will grant a letter of credit.

Having the document gives the buyer greater negotiating power with the seller, as it proves that the buyer has approved credit with the bank. For the seller of the property, it is a solid guarantee that he will receive the value of the transaction.

“You can, and I even recommend, getting a letter of credit from more than one institution to understand which table will make the most sense for you,” says Dantas.

How to simulate real estate financing

First, calculate how much you can afford as a down payment, which is usually between 20% and 30% of the property value. Then, determine the total value of the house or apartment you can afford to purchase.

For example, if you have R$100,000 to put down as a down payment, this means that you can finance a property worth between R$300,000 and R$500,000, approximately.

It is also important to choose the financing term, which can be up to 35 years, and research the current interest rate offered by financial institutions for the type of financing you want. Today, the average rate charged for real estate financing is 10%.

With this information, fill out the bank, broker or real estate agency simulator.

The simulator will show you the approximate value of the monthly installments of the financing. Some simulators offer a detailed table showing the division of the installments between amortization and interest over time. Also check the total amount to be paid over the course of the financing, including interest and fees.

Real estate credit experts recommend simulating different scenarios —such as a different down payment amount, more or less term— to compare which alternative and institution offers the most advantageous financing.

Click to access the financing simulator for the main banks:

Tool shows income disparity needed to finance

According to Loft, to obtain financing to buy a property in Vila Andrade —the neighborhood with the most transactions this year in the city—, considering the average price of properties and current banking conditions, you need to have a monthly income of R$23,300.

In this case, it would be necessary to pay R$6,500 for the first installment of the financing.

In Jardim Europa, where the average price of properties sold this year is R$7.8 million, the buyer would need an average income of R$240.4 thousand, paying an initial installment of R$67.4 thousand.

The data was obtained by Loft’s simulation tool, which considers the average price of properties sold between January and July of this year, according to the official database of the City of São Paulo (ITBI).

Tool considers financing of 80% of the property, with the option of 420 installments.