As costs of real estate investment rise coupled with an unsupportive bank balance thinking about buying a house can be quite discouraging. But how long can you keep postponing? The prices are only going to hike and with flourishing expenses, one can never save enough to buy a house without a bank loan. With some research, a common home buyer can make a quality investment by choosing the right housing loan.
Here are some tips that will help you choose the right housing loan for you.
- Know your financial capacity: – To be able to obtain a housing loan, your financial standing is assessed based on three things:
- Your income: – This is considered to help the lender determine whether you will be able to repay the loan or not.
- Your credit history: – Managing your money is as important as having it. You credit history tells the lender your ability to judiciously manage your finances.
- Your debt service ratio: – This ratio will determine the part of your monthly income that will go into amortization. For financial stability make sure that no more than 30 percent of your income goes into housing.
- Ascertain the amount you should borrow: – The bank doesn’t sanction you a loan based solely on your income. The estimated value of the property you intend to buy is also kept in mind. Banks may lend amount up to 80% of property’s selling price. You should borrow only the amount you will easily be able pay back.
- Study alternative financing options: – Determine which home financing scheme offers loan you can afford. To help you figure out your options here is a list of the loans available for Filipino home buyers:-
- Bank loans: – For home buyers the first choice while looking for loan are commercial and universal banks. That is mainly because they provide larger loan tenor and least interest rates.
But banks are very strict in approving the loan and ask for many documents which include government ID, income tax return for employees, certificate of employment, and pay slips. Take assistance of a loan officer to help you choose a bank according to your needs.
- In-House financing: – An uncomplicated and simple financing scheme, In-House financing only requires :-
- Down payment
- Verifiable proof of income
But being very simple, this financing scheme provides house loan at 14-18 percent which is higher than others and the loan tenure is also very short.
- Social Security System (SSS) Home loan: – To opt for this scheme you must either be a member of Social Security System (SSS) or a Filipino worker whose age is not more than 60 years. The interest rate of an SSS home loan is 9-14 percent per annum and payment term is 5-30 years. If your loan exceeds 15 years then the interest rate is renewed every six months.
- Pag-IBIG (Pagtutulungan sa Kinabukasan: Ikaw, Bangko, Industria at Gobyerno) Fund: – It is officially named as Home Development Mutual Fund (HDMF). This program offers loan for long tenors of 20-30 years.
- The facility is exclusive for members who have made at least 24 monthly contributions and with no existing loan with another bank or a Pag-IBIG housing loan that had been foreclosed.
- The maximum amount that can be loaned is Php6 million and the interest rate is 8-11.5 percent.
- Three qualified members within the second degree of affinity can apply for a single loan to finance the same property.
This funding option is quite flexible and affordable which is why it has helped minimum wage earners in buying their own house.