Getting a home and owning it is certainly one of dreams for most of us. However, with the high costs associated with it, most can’t afford it to pay in cash hence resorting to a housing loan.
If you are a first-time home buyer, here are some tips to consider when getting a housing loan.
Check Your Budget
Getting a housing loan involves monthly payment of amortization. Hence, the first thing that you should consider is to check what you can allot to pay for the monthly amortization.
Check your current savings and the combined monthly income you’re getting your job and other side hustles. Make sure that you can allot payment from it or risk of losing the house through foreclosure if left unpaid. In fact, this should be your first priority above all else before deciding to buy the house of your choice.
Pay Your Equity
Banks and developers nowadays require equity of at least 20% to the property you’re buying before you can even turn to housing loan. If you are buying a pre-selling property, you must choose to buy one that has a longer turn over period.
The longer the turnover during the time you got the property, the lower the monthly amortization you are required to pay. For example, getting a property 45 months before turnover would result to a lower monthly amortization versus getting one 24 months before turnover.
Use Your Life Insurance
Getting a housing loan involves costs which include bank financing costs, mortgage redemption insurance or MRI, among others. Some banks accept life insurance as mortgage redemption insurance. When you scout for banks to get your housing loan, do not forget to ask if they accept your life insurance as MRI.
MRI serves as an insurance claim by the bank in case of untimely death of the borrower and the housing loan is not yet fully paid.
Weigh Your Housing Loan Options
Comparing interest rates between financial institutions can be a challenge, but knowing which one has the most favorable one can make a huge difference in the long term. A mortgage comparison calculator might be of help to assess how much can you potentially borrow based on your income.
Three of the most common home financing options are in-house financing (from developers), bank financing, and Pag-Ibig housing loan.
In-house financing is a program usually offered by developers who wish to buy their property through a series of installments. The advantage of in-house financing is that there are minimal documents required. However, expect a bigger down payment and a higher interest rate compared to what other home loan sources offer.
Commercial banks have some of the most competitive interest rates in the market. However, approval of the housing loan can take as long as 90 days which would be a delay especially if you have an immediate need for a loan. If you plan to make a housing loan, make sure to apply for it at least 3 months in advance before the scheduled turnover of your property from the developer.
The most flexible is the government’s Home Development Mutual Fund or more commonly known as Pag-Ibig. However, the disadvantage is that they only offer up to a maximum of 6M.