You found your dream condo; the next step is to get a home loan. The good news is that there is no better time for Filipinos to buy property. The economy is strong and bank interest rates are at a record-low.
However, if it’s your first time to get a home loan, you may feel intimidated both by the paperwork and, understandably, the financial commitment. This article can help give you the “lay of the land” and prepare for the process.
Step 1: Prep your credit profile
In the United States, people can check their credit score (which rates their credit history, or how much they’ve borrowed and how they’ve paid it off). In the Philippines, credit scores are not public. However, bank officers will assess your financial capabilities by asking for proof of income, tax records, and bank statements. If you are married, you will also be asked to submit your partner’s records.
Even if you’re just planning to buy a home in the future, beef up your credit profile. Whittle down credit card debt. Open an account in the bank that you plan to get a loan from. “As soon as my husband and I got married, we reviewed the home loans of different banks. We chose one, then opened a joint savings account there. That’s where we put our money for the down payment. We also got the bank’s credit card and made sure to pay for all the charges in full at the end of the month,” says Leah S. Five years later, when they were ready to buy a condo, they already had a good relationship with the bank, and they had no problems applying for a home loan.
Your chances of getting a loan also hinge on employment history. Ideally, you have worked for at least two years in a stable company. Remember that the bank also looks at your future capacity to pay. If you are an entrepreneur or freelancer, you may need to present more documents to show your financial stability.Even if you’re just planning to buy a home in the future, beef up your credit profile.
Step 2: Prepare your down payment.
Bring a down payment of at least 20% of the total property value. The down payment assures the bank that you are financially capable and ready to absorb some of the financial risk; it also lightens your monthly amortizations and gives you the option to shorten the loan term (or the time it takes to pay off the loan). “I always dreamed of retiring from the corporate world at 50 years old, so I calculated my home loan in such a way that I’d be debt-free by the time I was 49. I didn’t want the mortgage payments to stop me from leaving my job,” says Ronald F.
Besides, your monthly amortization should never go beyond 30% of your monthly income. Banks will make sure of this–and so should you. Financial experts say that your home loans should not interfere with your ability to save for your retirement or meet your other monthly expenses. Otherwise, you’ll spiral into debt. So, the exercise of saving for your down payment can act as your personal litmus test of whether you can afford amortizations, or teach you the financial discipline to live within a budget that includes home payments.
The down payment assures the bank that you are financially capable and ready to absorb some of the financial risk.
Step 3: Choose the property well.
Banks do look at the property that you want to invest in–especially when it comes to a condo. An insider explains: “Condo financing is very situational because it depends not only on the borrower but also on the project itself. The guidelines have tightened because lenders want to see a financially healthy condo development. They want to see a higher concentration of owner-occupants, and they want to see that delinquency rates on condo fees are low.” This is particularly true for pre-selling units, since smaller, fly-by-night developers who are just leeching off the Philippine real estate boom may not be able to complete the projects.
That’s why your chances of getting a home loan improve if you invest in a condo by a reputable property developer like Megaworld.
Step 4: Compute the amount of money you need to borrow.
This is based on the total value of the property (which you can get from the real estate agent) and your own personal computations. “My husband and I sat down and looked at our current financial situation. We looked at our joint income, our other financial obligations–for example, our daughter will be going to school in two years and we needed to set aside money for her tuition and her college education–and other obligations we might have to face in the future,” says Sarah L. The talk was very thorough and productive, and led them to plan not just the home loan but think through how it would affect other life decisions. “We talked about how many children we planned to have, and even our careers–because, after all, our income was a big factor.” This information, and the decisions they made together, made them more confident about taking a loan. “We’d always been wary of taking a home loan because of fear of the unknown, but once we talked, we were able to make a life plan and built our financial plans around that.”
Step 5: Talk to your real estate agent.
Sarah and her husband were able to set a budget, went shopping for condos. They fell in love with a Megaworld condo unit located at The Fort. “The township lifestyle really drew us in. We also saw that this was a good investment, because of the reputation of Megaworld and the excellent location,” says Steve, Sarah’s husband. They presented their budget to the real estate agent, who showed them the breakdown of costs.
Step 6: Look at different financial lenders.
Filipinos can approach different banks or get a Pag-IBIG housing loan. You are a qualified Pag-IBIG member if you have made steady contributions for a minimum of 24 months at the time of application. If you haven’t been making payments for 24 months, you can make a lump sum payment of the missing contributions.
What’s the easiest way to compare banks? Check their websites (some of them have home loan calculators) and call their hotlines for a list of the documents they require. Then, drop by the branch for a one-on-one meeting with the bank officer. “Since I already knew how much the unit cost and our real estate agent had given us several payment scenarios, I was immediately able to find out if our income qualified us for the loan,” says Sarah and Steve. “The bank did the background checks and got back to us within a few weeks, and after that it was just ticking off items in a checklist. There was a lot of tedious paperwork, but it actually seemed pretty routine. The financial planning is the hardest part,” says Sarah.
A condo is a major investment, and home loans are a long-term commitment. So a little anxiety is normal. Just take things one step at a time, and if you hit a roadblock, just talk to the bank and your real estate agent, who have been through the process several times and are able to answer your questions. “You have two things in your control: your credit history and your budget. Just focus on that, and trust that your lenders and your real estate agent will answer whatever questions you have on your loans and your property,” says Steve.Filipinos can approach different banks or get a Pag-IBIG housing loan.
For example, the Megaworld team will be able to take you through its many flexible payment schemes, answer questions about pre-selling, or other properties that may interest you. For more information, go to Megaworld at the Fort.
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