Nothing beats that vibrant feeling when having a property under your name, or that you can truly call your own. Almost everyone, dreams of having a house and lot where they can feel safe and secured. However, before you start looking for the perfect house, it is important to first assess your financial situation. Do you have the financial means to purchase such a property? Purchasing a home is a difficult task because there will be ongoing costs such as property taxes or association fees even after you move in. Furthermore, unanticipated expenses will arise along the way, and having savings on hand will keep you from being caught off guard. Due to that, Banks had figured out a way to make it easier for their prospective buyers to purchase their homes by offering pre-approved bank housing loans.
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What are Pre-approved Bank Housing Loans?
A bank housing loan pre-approval tells you how much you can borrow, which tells you what price range of properties to look at. Checking out a long list of available houses for sale can be overwhelming, which is why looking at ones that are out of your price range wastes time, so having a pre-approval ensures that you only look at ones that you can actually afford. In other words, this will help you decide which property to buy based on the predetermined loan amount.
Consider this to be the first half of the home loan application process. During this point, you will be asked to provide information about your income, employment history, and the property you intend to purchase, and among other things. Also, you will have a better chance of getting a housing loan approval specially if you are to be given a pre-approved status since the loan amount has been pre-determined that will be compatible with your financial capacity.
Consulting with a Bank for a Housing Loan at the same time obtaining a pre-approval letter allows you to discuss the best loan options for your needs. At the same time, this pre-approved step can help to clarify your total house-hunting budget as well as the monthly mortgage payment that you can afford from the assessment of the lender.
How Do I Get “Pre-approved” for a Housing Loan?
A pre-approved home loan will assist you in getting your finances in order during the initial stages of your housing loan application so that you don’t have to deal with any surprises once the process begins. Now that you understand what a pre-approved bank house loan is, you should concentrate on how to ace the consultation and obtain the “pre-approved” status for your dream house. Here is a guide to help you prepare for your bank consultation.
1. Have Enough Savings
Before even thinking about buying a home in the Philippines, make sure you have enough savings to cover any unexpected future expenses. Emergencies, particularly those involving health, are costly to cover, especially given the country’s high cost of health care for the average citizen. If you want to be financially secure before making a down payment on a house for sale in the Philippines, it is recommended that you have a savings or emergency fund from which you can easily withdraw funds without having to withdraw from your housing loan down payment.
Also, don’t be discouraged if your neighbor saves more than you, what matters is that you have the discipline to save money. Every peso matters.
2. Study the Bank’s Terms and Qualifications
Understanding the bank’s qualifications gives you an advantage in preparing for your loan application. Banks take your age into account when evaluating a loan application. Banks prefer to lend to people between the ages of 30 and 50 because they are considered financially stable. People in this age group have worked for a few years and have plenty of time to repay the personal loan.
Furthermore, it is critical to review your chosen bank’s terms and conditions, as some banks may require collateral to cover their risks. At the time the loan is approved, borrowers may be required to authorize the bank to place a lien on any assets pledged as collateral. If you fail to repay the loan, the bank has the right to seize and sell your assets in order to recoup its losses.
3. Provide Evidence of a Steady Income Stream
Banks would never lend money to someone who do not have a consistent source of income. After all, how can they expect a borrower to pay if they don’t have a steady source of income for them to be able to pay their loan? Lenders want to ensure that you not only have an income from one or more sources such as salary, income from your own business, freelancing, and more but that this income is sufficient to pay off your loan in a reasonable amount of time while still providing for your lifestyle or basic needs.
An unstable income is a turn-off for lenders; without a steady job, lenders will have the lack of confidence that you will be able to make your loan payments. Make sure you’ve established your professional roots and have been with the same employer for at least two years before applying for pre-approval. Business owners and freelancers are subject to the same job tenure requirement.
3. Minimize Liabilities or Debts
In the Philippines, unlike other countries such as the United States, there is no unified credit rating system, which creates a credit score for Filipinos. Which is why banks assess your loans application through other means.
A list of your credit card accounts, credit card providers, and the amount you owe may be requested by the bank to which you are applying. This is to help lenders determine how much debt you have and how likely it is that you will be able to pay it despite your other obligations. So, in order to increase your chances of getting approved for your desired home, you should reduce your debts so that they are easier to manage, and bankruptcy is less likely for you. Also, Banks may be hesitant to approve your personal loan application if you have a poor loan repayment history or unpaid debts.
In addition, the bank evaluates your debt burden ratio (DBR) to determine whether you are capable to pay such loan. This is calculated by dividing your total monthly amortizations (including the new loan for approval) by your gross family monthly income. The DBR is a tool used to determine whether you have enough cash left over after paying for all of your home’s necessities.
5. Increase Down Payment
Borrowing less money means having less money to repay. This frees up cash for other purposes or allows you to take out a shorter-term mortgage with a lower interest rate. Lenders prefer borrowers who take out relatively small mortgages on homes because, if the lender has to foreclose, it has a good chance of selling the house for more than the loan amount. Not only that, but the lender believes you have a stronger incentive to keep paying if you risk losing your down payment if the lender forecloses.