The Credit Consultant Sometimes Has to Say: "Don't Buy This Property"

How would you introduce yourself to the audience of CareerDailyNews and what is your professional path to becoming the manager of "Credit Center"?

I have been involved in real estate and team management for over 28 years. 22 years ago, I accepted the challenge to create Credit Center – the first credit consultant in Bulgaria, and for 22 years I have positioned it as the absolute leader in the Bulgarian market. In 2007, we also became licensed as an insurance broker, and since then we have been helping our clients make the best choice for a loan or insurance that best meets their needs while also being the most cost-effective.

Why are more than half of the clients in Bulgaria now seeking a credit consultant when purchasing a home?

It took us 22 years to show clients here in Bulgaria all the benefits of working with a professional credit consultant, and last year 52% of those who took out mortgage loans in our country used the services of a credit consultant, with about 24% of them using the services of Credit Center. Naturally, there are many countries where the use of credit consultants is significantly higher, such as the United Kingdom, where almost 90% of mortgages are with a credit consultant, the Czech Republic around 75%, Poland – 71%, the Netherlands – 65%, Hungary – 60%.

What does a client actually gain from a good credit consultant that they would find difficult to achieve on their own?

The most important thing a client gains in a credit consultation is the correct determination of their budget for purchasing their own home, proper structuring of the credit transaction, negotiating the best terms for their loan, and full assistance throughout the entire process of applying for and approving their loan. And the best part that we have managed to achieve in Bulgaria is that this service is completely free for clients and is fully funded by the banks.

What are the most common mistakes people make when they search for a mortgage loan on their own?

The most common mistakes clients make when choosing a mortgage loan on their own mainly involve incorrectly determining their budget for purchasing a new home, not accurately forecasting all expenses related to the transaction and the mortgage, as well as the budget for finishing and furnishing the property when buying new construction at the stage of plastering and screeding. They often also do not choose the right bank for their loan, which necessitates refinancing the loan sometimes as early as the first or second year of taking it out. Sometimes they overestimate their capabilities and jump into large loans that they later struggle to service. It is also a mistake to rely solely on preliminary approval based on income and not take into account the specifics of lending for different types of properties.

How should a person prepare their finances before making a home purchase with a loan?

The most important things are to have the necessary down payment and sufficient savings to cover the costs of the transaction. It is good to have a good forecast for the development of their income in the coming years, as mortgage loans are most often taken out for a term of between 25 and 30 years. It is important to assess what new expenses will arise with the purchase of the new home and how the monthly payment will affect the family budget in the future.

How can a client recognize a good credit consultant?

For clients, it is important to choose the right partner for what is often the largest financial deal in their lives. Most of our clients come by recommendation from a previously served client or from research they do online, choosing a credit consultant based on the reviews left by clients in the online space. Some check the Register of Credit Intermediaries on the BNB website or ask for a recommendation from their broker. It is very important to be informed about how many banks the credit consultant works with to ensure they will offer them the maximum choice of advantageous credit products. It is also significant how many years they have been in the market, the experience they have accumulated, and how often they are recommended by clients who have used their services.

Where is the line between "I can afford this home" and "the bank will grant me a loan for this home"?

It is difficult to set a precise boundary, but it is very important to control the desire to have the largest and most beautiful home in the best neighborhood and to make the right assessment of what loan we can service long-term. Sometimes, even if the loan is possible, if it is at the edge of the household's financial capabilities, it can lead to problems in the future both in terms of servicing the loan and in terms of deteriorating the quality of life for the family.

What percentage of monthly income is reasonable for a person to allocate for a mortgage payment without putting their budget under excessive pressure?

Here, the rule has always been that no more than 30% of our income should go towards repaying all credit obligations. Naturally, people with significantly higher incomes than the average can afford to go up to 40-45% of their income, but in general, it is better not to exceed 30-35% and to have enough income left to cover our monthly needs, as well as to be able to save at least 10-15% of our monthly income.

What are the biggest risks with a variable interest rate mortgage and how can the client assess them in advance?

In Bulgaria, we are optimistic about interest rates and their movements in the future, and over 98% of loans taken out in the last year have a floating interest rate. It is important to note that the trend of interest rates declining since 2010 is coming to an end. Soon we will see a reversal of the trend and a slight increase in interest rates. There is nothing worrying about this, but people choosing a floating interest rate should review their offers for refinancing periodically, especially if rates start to rise significantly once a year.

Is it possible for a person to get approval for a loan that they cannot comfortably service?

Unfortunately, this is possible. Currently, this mainly happens with quick loans, where the assessment of clients' creditworthiness is lowered, but for people with the lowest incomes, it can also happen with a bank loan due to poor judgment of what monthly payment they can realistically service.

Are there cases when the credit consultant should tell the client: "Don't buy this property"?

At Credit Center, this year we have refused or changed the budget of 14% of our clients. This is very important and mandatory in credit consulting. If we sense that the client is overestimating their capabilities or not correctly assessing all the risks they are taking with the requested financing, we are obliged to advise them to postpone the purchase and the loan and to better prepare for this step, giving them specific guidance on what and how they need to change or adjusting the initially requested loan amount to one that they can service without problems.

Do Bulgarians still buy homes with the belief that "property always appreciates"?

Yes, for Bulgarians, property is not just something they must own, but also the most familiar and accessible option for investment, sometimes with more optimistic expectations than the market can actually offer. For example, last year, the fear of property prices rising after the adoption of the euro led many Bulgarians to rush to make purchases that were not always well assessed and rational. Buying property as an investment is something that should only be done after careful research of the real estate market, the potential for price growth, and the possibilities for rental income.

Is it more important to buy the home we like or the loan we can comfortably service?

Everyone tries to combine both, making the best deal possible in terms of their dream home and the loan they can afford. My observations are that most of the time clients manage to make such a deal, even if it sometimes takes a year or a year and a half of searching and preparing for the loan.

What are the most important changes in the behavior of Bulgarians seeking mortgage loans in recent years?

I would say that Bulgarians have become more informed, more demanding, and less risk-oriented, which is good for all market participants. Deals and purchases are not made at any cost; they are chosen carefully, and clients listen to the advice of their credit consultant. Naturally, it is also evident that there is a desire and ambition to buy a larger home, well-built and in a nice and organized neighborhood in a big city.

How will AI change credit consulting – will it replace part of the consultant's work or make them even more useful for the client?

For now, AI is not very well prepared in the field of credit consulting, mainly because it cannot negotiate preferential terms given the specifics of the client and the property they want to buy. Perhaps in the future, developers will create processes in this direction, but at this stage, we are still far from precise and personalized credit consulting from AI.

What will the mortgage market in Bulgaria look like in 3–5 years and how will the role of the credit consultant change?

It is difficult to predict that far ahead, but we are currently entering a period of gradual interest rate increase, which in the next few years  will require credit consultants to enhance their expertise towards more forecasts for future movements of interest rates, property prices, the choice between floating and fixed rates, and more. I expect that in the coming years, the percentage of clients who will use a credit consultant will increase from the current 52% to around 65%.