Purchasing your dream home might end up being the most daunting task even for the most enthusiastic buyer if you don’t have a fancy and sufficient bank account. But with the right backing and financing, you can score yourself a good amount of investment to fund and help you buy your dream home.
You can follow the following tips to be able to choose the right housing loan to buy yourself a house:
- Be aware of your financial capabilities - One of the smartest moves you can make to purchase a house is get yourself a good housing loan. How do lenders evaluate whether they should give you a loan or not? They consider 3 things while assessing a loan application - the applicant’s income, credit history and their debt service ratio.
- Zero in on the amount that you need to borrow - Apart from your repaying capability, the appraised value of the property is extremely important in determining the amount you require for the loan. Most banks in the Philippines are known to lend either 80% of the selling price of the property or a minimum amount of P 400,000.
- Research all your financing options - Spend quality time to research on all financial schemes and offers on loans that are available in the market. You must be aware of the EMIs that you will be paying and it must be comfortably within your budget before you finalize on which housing loan to take.
- Take a closer look at bank loans - Private banks are the first options we think of when we need financing for our home loan. Banks are known to provide applicants with longer tenors for repayment of the loan and interest rates that are competitive as well as affordable as opposed to other lenders in the market.
- Consider the option of in-house financing - This method is the easiest and most straightforward of them all. Here, the developers only ask for you to make a downpayment for the property and a proof of income that is verifiable. This kind of financing comes at very high rates of interest because the application process is flexible and the tenor of the loan is very short and doesn’t usually cross 10 years.
- SSS Home Loan - Filipinos who are members of the Social Security System or overseas Filipino workers can apply for a home loan from the SSS if they have made at least 24 contributions before applying for the loan. The interest rates on the loan can range from anywhere between 9 and 14% annually and can be repaid over a tenor of 5 to 30 years.
- Pag-IBIG Fund - Taking a loan from the Pag-IBIG fund, has been observed to be the most flexible and affordable financing option in the Philippines. Just like the SSS, to be eligible for a loan from the Pag-IBIG Fund, the applicant must have made a minimum of 24 contributions monthly to this government provident program. This program also provides long tenors such as 20 to 30 years for repayment of the loan with a maximum amount of P6 million offered to be loaned at an interest as low as 8 to 11%.
Your financial situation, which is determined by your income, helps gauge your repayment capacity of the loan. Your credit history is assessed to see how well you manage finances and repay debts. Finally, the debt service ratio is a part of the monthly take home that will be deducted towards your EMI. In an ideal situation, one must ensure not to spend over 30% of their monthly income on a loan.
It is noteworthy to remember that you must only opt for a loan amount that you will be able to repay comfortably to avoid any kind of foreclosure of the loan and losing out on your hard earned investment.
Also, banks are very particular about documentation unlike other lenders. Banks usually ask for documents like proofs of income and proofs of identity issued by the government, certificate of employment and income tax returns for verification before approving your loan application.
Yes, investing in a house is quite intimidating. Doubts and fears are usually eliminated with knowledge and awareness. When you are able to make a well informed decision, you will sleep well at night, safe and secure in your own home.
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