First trip to the bank

Some realtors make you do this step before you talk to them, but ours didn't care, so we did it after we saw a few houses.

A friend of ours from Ariel had a friend who was a mortgage guy at Mizrahi Tefachot in Airport City, so we called him and made an appointment to sit down with him.

First, we had to bring in S's last 3 paystubs - tlushim, as well as the last 3 months' worth of bank statements.
We told him our approximate house budget as well as how much we wanted to put down.  He started inputting numbers, asking us questions from time to time - when we made Aliyah, etc.

Then we get to the mortgage plans available.  The following information I am copying from http://www.mortgageisrael.com/showpage.asp?pageid=4

with my own edits based on what I learned.

A Shekel linked mortgage at fixed interest

A mortgage at a fixed interest rate linked to the consumer price index for a period of 4 to 30 Years - but they don't like to give them for that long because of the risk of hyperinflation. The bank charges high fees for early repayment.

A linked mortgage at variable interest

A mortgage at variable interest linked to the consumer price index, which can be spread over an extended period of up to 32 years - and thus making it possible to have lower monthly payments.  The mortgage gets adjusted every 5 years.  Also, there are no fees for early repayment

A linked mortgage at the Prime interest rate

A mortgage linked to the prime interest rate (based on the Bank of Israel's Rate) for a period of up to 25 years. Again, they don't like to give them for that long and charge fees for early repayment.

There are also mortgages linked to assorted foreign currencies and Oleh mortgages.  As olim, we are entitled to about 100,000 NIS at a 3% rate that can be paid back at any time (early or on time) and is completely fixed.

Here's how it works. You create a mortgage plan combining these different plans in a way that works for you.  Obviously, the adjustable-rate has the lowest interest, but is the riskiest.

One other thing:  unlike the US, the banks here are very worried about monthly payments and will not give a 10 year fixed mortgage if they think the monthly payment will be too high (even if you have investments abroad).  They would much rather give a 30 year mortgage - which they know you will repay in 20 years - with a reasonable monthly payment. 

However, there is a way around this.  You decide in advance how much you want to pay back in 5 years.  Remember that Adjustable-Rate no fee repayment?  Every year or so, you walk into the bank with a check, thereby shortening the span of the loan be repaying the money.  So, if you put 10 years into an ARM and you repay it in 5 years, you just shortened your time by 5 years.

We finished at the bank and waited for a response.  We got the approval 1 business day later.