Most Filipinos either rent an apartment or just live with their relatives; nevertheless, some of us simply live on the streets having nowhere to call “home.” The majority of us are dealing with this unfortunate fact, especially during this epidemic. We are urged to stay in our familiar surroundings, and dreaming of owning is the first step toward making that desire come true. One should be aware though, that it’s not quite simple to find an affordable house and lot for sale in the Philippines. But getting financially ready to buy a house is the first step in achieving this dream.
Are you thinking about buying real estate soon? You may forget about creating your dream home from scratch because the price index for building materials reached an all-time high in May 2022, 8.3%, up from 6.9% the previous month. Alternatively, you can search for an affordable house and lot for sale in the Philippines and make that purchase. Good thing, BRIA Homes is ready to deliver quality and reasonably priced condominium apartments and house and lot packages to everyday Filipino families.
Are you ready to buy a house?
We get it. You have a dream of owning your own house and a lot sooner. But the only query left is, are you prepared financially for this milestone? When preparing to purchase a house and lot in the Philippines, you must be financially prepared. This includes creating a budget, selecting a lender, determining the amount of taxes due, and other financial considerations.
Any type of real estate purchase needs a significant investment of time, energy, resources, documentation, and, most importantly, cash. Being a homeowner may be the biggest decision you ever make, so you should consider all your options.
Signs that you’re getting financially ready to buy a house
1. You have a consistent source of income
Consider whether you absolutely have the funds to make the purchase after you’re prepared psychologically and emotionally to settle down. You should be able to accumulate enough money for a down payment and qualify for housing loans in the Philippines if you have a consistent cash flow from well-paying work, a profitable business endeavor, or prosperous freelance employment.
2. You can afford the closing costs and initial deposit
A sizeable amount of the cost of the house is covered by mortgages like the BPI housing loan or the Pag-IBIG housing loan. The deposit, equity, and closing expenses when purchasing a home in the Philippines still require more funds.
On the other hand, there is no down payment necessary for properties that are being purchased with Pag-IBIG financing. There might, however, be some processing charges. Also, keep in mind that some of the homes for sale might have been vacant for a time or might not have undergone repairs or renovations. To make one livable or ready for habitation, you might need at least 100,000.
3. Your debt-to-income ratio is relatively low
Any way you look at it, a recently purchased house is still a sort of debt unless you can pay for it in full. In the Philippines, purchasing a home typically entails being reliant on a bank or Pag-IBIG financing. You could find it challenging to take on a new financial obligation if you’re currently making payments on a sizable credit card debt or auto loan. Prior to accepting a new obligation, focus on paying off your debts.
Your debt-to-income ratio, or the proportion of your gross monthly income that is used to pay your monthly debt payments, enters the picture at this point. Your monthly loan payments should ideally not exceed 40% of your income, as mentioned earlier. So, start with the math. You might begin looking for a new location to live if your debt is significantly less than your monthly income.
4. Even with a mortgage, it is still possible for you to live comfortably.
Making ensuring your lifestyle remains uncompromised is essential for maintaining financial stability. What good is possessing a home if it prevents you from living in a cozy environment every day?
Being a prudent homeowner involves making regular payments. Be consistent in paying your monthly dues. You only need to skip one installment a month to increase your payment to include interest. Maintain a consistent payment schedule to prevent late fees.
When determining whether to purchase a home, getting financially ready to buy a house plays a major role. Be careful to avoid being “house poor,” a term used to describe when you don’t have enough money for living expenditures because a significant portion of your income is spent on homeownership fees. This may occur if you don’t readjust your expectations for the realities of home ownership.
When you don’t have enough money to pay for your home, you find yourself denying yourself of the comforts of life. Once more, it’s important to do the arithmetic before applying for a mortgage. You shouldn’t have to cut out on the necessities because of your mortgage.
Read also: Real Estate 101: Nine Things Nobody Tells You About Buying House and Lot in The Philippines
We’ve put up a guide on how to make the process of buying a property go smoothly and to help you getting financially ready to buy a house.
6 things you can do to secure a smooth home loan approval
1. Boost your credit score.
If you want to purchase a home, you must apply for loans and mortgages, both of which depend heavily on your credit score. Therefore, clearing up any negative notes on your credit should be your first priority. This includes things like unpaid bills, overdue payments, and accounts that are being collected.
Start working on these improvements at least six to twelve months before you intend to begin the home-buying process. Make sure to resolve any unpaid bills with your creditors or pay off any outstanding balances. Your debt score will improve if you pay off these unpaid bills, making you more appealing to banks and lending organizations.
2. Learn about your debt-to-income ratio.
It’s time to calculate your debt-to-income ratio after improving your debt score. Your debt-to-income ratio is used by lenders to determine how your expenses compare to your income. It gives you a decent idea of how secure your finances are and whether you can handle the added burden of a mortgage.
The ideal mortgage payment ratio is for it to be less than 30% of your present income. Your debt-to-income ratio shouldn’t be higher than 40% when taking into account all of your debts as well as your new mortgage.
It is important to speak with them about it because each bank and lender has various policies when it comes to home loans. Before attempting again, you might need to pay off debt obligations, depending on your financial status.
3. Understanding your financial capability
A new house purchase is a significant financial undertaking, so assess mindfully whether you can afford it. As we previously stated, your debt-to-income ratio is a reliable measure of your ability to repay your mortgage. There are still other payments for your new house to take into account.
Your annual payment of property taxes, which range from 1% to 2% of the assessed value of your home, will be based on where you live. Another expense to think about for your budget is home insurance, which helps safeguard your new home from different disasters and comes with a monthly cost.
4. Get ready to pay a down payment
You can get a bank loan or a Pag-IBIG housing loan to help with a sizable portion of the cost of your home, but you’ll also need cash on hand for the down payment.
If you’re purchasing a condo, you should set aside at least 5% of the purchase price as a down payment. Depending on what you agree upon with the property developer, you may pay this in one big sum or over the course of several months.
On the other hand, based on the loan you receive, acquiring a home or lot may or may not require you to make a down payment. You won’t need to make a down payment if you use PAG-IBIG financing, but you will need to pay some service charges.
5. Establish an emergency fund.
It necessitates a great deal of effort to keep a house in order, and unplanned costs must be budgeted for. Along with loans and down payments, you should set aside cash for unforeseen difficulties with your house purchase.
Create a home emergency fund in your budget. This makes it easier for you to handle any unforeseen costs related to your house. This covers house upgrades like leaking roofs, bug infestations, broken appliances, and so forth.
Start setting aside a portion of your income to accumulate at least three to six months’ worth of household costs in order to develop a solid emergency fund. For instance, if you figure that maintaining your property will cost you PHP 10,000 per month, you’ll need to set aside PHP 30,000–60,000 as an emergency fund.
6. Get ready to submit a loan application
Finally, the last step in getting financially ready to buy a house is of course to get ready to submit your loan application. If you don’t prepare the necessary documentation or have financial difficulties, your application may be refused. Therefore, you must plan ahead if you want to improve your chances of being accepted.
In addition to your credit score and debt-to-income ratio, the first thing that banks will consider is your financial stability. You must therefore demonstrate that you have a job that you have had for at least a year or a firm that has been running for at least two years.
The best course of action is to continue working at your present position if you intend to apply for a home loan. Avoid departing with the purpose of starting your own company or looking for work elsewhere in the interim.
Tips for Getting Your Dream Affordable House and Lot
Remember that purchasing a home in the Philippines is a goal that requires time, preparation, and sufficient funds. With so many things to think about, you might want to make sure your home investment plan is in line with your long-term financial objectives by solidifying it first.
1. Explore available residences.
Then look for the best personal or mortgage loans. Work for home ownership if you believe you are not yet financially capable of doing so.
2. Look at the advantages and disadvantages
You can determine if your selected home is the greatest option for you after looking into many options and weighing the advantages and disadvantages of each. Make sure you are familiar with its features, costs, and specifications. Think about factors like location, such as if it is close to employment or near necessary necessities.
3. Save for the initial deposit
You can start saving money now while you’re still in the planning stage for a down payment on a house. It is advisable to maintain separate accounts for your personal savings, an emergency fund, and other expenses of this nature. You can meet your financial obligations relating to the cost of buying your home by saving money for the home of your dreams.
Read more: 10 Tips in Achieving Your Dream Affordable House and Lot This 2022
Financial preparation is the key if you’re considering purchasing a new home and getting financially ready to buy a house. To get started on establishing your investing strategy, you’ll need financial expert advice on how to budget for a new home!
One of the real estate firms in the Philippines with the best reputation is Bria Homes. For typical Filipino families whose main objective is to own a home, Bria Homes Inc. has made it a priority to find and develop affordable, fairly priced houses and lots as well as affordable condominium flats with flexible payment options.
Last but not least, get in touch with BRIA Homes if you need assistance finding the finest yet reasonably priced homes for sale in the Philippines. We go above and above to create superior lots for Filipino families at the best price. To start searching for your ideal property, get in touch with BRIA Homes right away.