Investment approach
Mortgage pre-approval in Spain: what it gives and what it does not
Pre-approval shows the real budget, but the bank is not bound by it. A binding offer appears only in the FEIN, after a specific flat is valued. What this means for the arras.
Mortgage pre-approval is the bank's answer on what sum it is in principle ready to lend, based on the buyer's income, debts and savings. The bank is not bound by it: the law treats only the FEIN (the standardised European information sheet) as a binding offer, which is valid for the agreed period of no less than 10 days and is issued at least 10 calendar days before signing (art. 14 of Ley 5/2019). Pre-approval helps to search within a real budget, but it does not insure the arras (the deposit contract).
How pre-approval differs from the FEIN
In Spain pre-approval is also called preaprobación, aprobación previa or estudio de viabilidad. Each bank has its own form, and the law regulates only the final offer.
| Feature | Pre-approval | FEIN |
|---|---|---|
| When it appears | Before a flat is chosen | After the tasación (bank valuation) and approval of the loan for a specific property |
| Whether it binds the bank | No | Yes, as an offer for the agreed period, minimum 10 days |
| What it contains | A guide to the amount and terms | Personal terms: amount, rate, term, costs |
| Whether the law regulates it | No, it is the bank's own format | Yes, Anexo I of Ley 5/2019 |
| Period of validity | Set by the bank | Stated in the FEIN itself |
Several weeks pass between pre-approval and the FEIN, and in that time the valuation of the flat, the buyer's income and the bank's policy may change.
What the bank checks at the start
The bank must assess solvency in depth before granting a loan (art. 11 of Ley 5/2019): employment, current and expected income, assets, savings, fixed expenses and obligations. The assessment may not rest mainly on the value of the collateral. According to the Banco de España's explanation, the bank looks at debts at other banks through the CIRBE (the Banco de España's credit-risk register) and default files such as RAI and ASNEF.
Two rules of the same art. 11 are useful to the buyer. The bank may not pass the cost of its internal assessment procedures on to the client (11.2). And on a refusal the bank must state the reasons in writing and without delay (11.6). A written refusal is useful if the arras contract is tied to obtaining the mortgage.
How to use pre-approval in the search and in negotiation
Pre-approval works in three places.
- Budget. The buyer stops viewing flats they cannot finance and does not rule out suitable ones. Taxes and transaction costs almost always come from one's own money and are calculated separately.
- Negotiation. The seller is shown the fact of approval, not its amount. If the seller knows the bank is ready to lend more than the buyer offers, haggling is harder. How to build the offer itself is described in the article on the offer to the seller.
- Timing. The documents are already with the bank, and after a flat is chosen what remains is the tasación and the final decision. That shortens the road to the notary.
Which questions to put to the bank or broker at this stage is collected in the article on questions for a mortgage broker.
What pre-approval does not guarantee: a worked example
Worked example, not a forecast. The bank pre-approved a loan of up to 400,000 € on condition that it does not exceed 80% of the valuation. The flat costs 500,000 €.
| Scenario | Tasación | Loan, 80% of valuation | Own money on the price |
|---|---|---|---|
| Valuation equals the price | 500,000 € | 400,000 € | 100,000 € |
| Valuation 30,000 € lower | 470,000 € | 376,000 € | 124,000 € |
The 400,000 € pre-approval has not changed, but in the second scenario the bank calculates the loan from the lower valuation, and the buyer needs another 24,000 € of their own money. On top comes ITP (transfer tax) of 10% on the part of the price up to 600,000 € (ATC), that is 50,000 € in both scenarios. How the valuation works and why it is sometimes below the price is covered in the article on the tasación. Your own figures can be checked in the calculator.
How to get pre-approval
- Gather a passport, NIE, proof of income, tax returns, statements and details of loans. Documents from another country should be prepared in advance, with translation.
- Approach two or three banks or a broker: approval at one bank does not mean the best terms are there.
- Ask for the answer in writing: amount, term, a guide to the rate, conditions on the share of the valuation.
- Ask how long the pre-approval lasts and what can cancel it.
- Match the pre-approval period against the search plan: if the search drags on, the pre-approval will have to be renewed.
When pre-approval does not work as protection
Pre-approval does not protect the arras. If the arras are signed without a financing condition and the bank in the end refuses or lends less, the consequences are determined by the text of the arras contract. In Catalonia the buyer may withdraw from the deal if the bank refuses, when financing is provided for in the contract and the refusal is documented within the agreed period (art. 621-49 CCCat, the Catalan Civil Code). Whether such a condition is needed and how to write it is for the abogado (lawyer) to decide.
Pre-approval also helps little when income or work changes before the deal, and for non-residents, whose requirements for documents and the down payment are usually stricter: more detail in the article on mortgages for non-residents.
Questions and answers
Is the bank obliged to grant the mortgage after pre-approval?
No. Ley 5/2019 treats the FEIN as the binding offer, which the bank issues after a specific flat is valued and the loan approved.
How long does mortgage pre-approval last?
The law sets no single period; the bank determines it. Ask for it to be stated in writing and renew the pre-approval if the search drags on.
Can pre-approval be shown to the seller?
The fact of approval can be shown, and it strengthens the offer. It is better not to disclose the amount, otherwise it is easier for the seller to hold the price.
Must the bank explain a mortgage refusal?
Yes, under art. 11 of Ley 5/2019 the bank states the refusal and its reasons in writing and without delay. That document is needed if the arras contain a financing condition.
Can pre-approval be obtained without living in Spain?
Many banks work with non-residents, but they check documents and the share of own funds more strictly. It is worth starting several months before the trip to view flats.
