SAVE FOR YOUR OWN DOWN PAYMENT
Putting together the money to pay for your condo’s down payment is not as difficult as you think if you are resourceful enough and know how to plan ahead.
If you think your one source of income from your regular job won’t be enough to make a down payment, looking for other sources would be a great idea. You can sell consumer products or insurance, maybe even do some freelance work---anything that can put your other skills to use.
Your other sources should be from the money you get from salary increases, performance bonuses, and 13th to nth-month pays. Putting all of them together can make a huge difference in hitting that down payment amount.
When you have the finances to fund your planned ownership of your first condo unit, you can choose from the down payment options available to you. There are 10% spot, 10% stretch payable in a set number of months and 20% spot with the 80% paid through bank financing.
STUDY YOUR FINANCING OPTIONS AND PAYMENT SCHEMES
Paying for the balance over the years is where the long term challenge begins, so this is where you should plan your finances carefully.
Since you won’t be able to pay for the condo unit in full, you will need the help of loans, and there are ways to go about this.
Banks are the most common financial institution that helps those who seek to loan money for their financial needs. In this case, the acquisition of your condo unit.
If a loan you applied for gets approval from the bank, it provides the money to pay for your condo unit in full while you pay your loan to the bank in flexible payment terms plus interest.
Banks offer short-term, medium-term and long-term loans, with different interest rates for each. Generally, the longer your loan term is and the higher the amount, the higher the annual percentage interest rate. Typically, banks have an annual interest rate of 4.99 to 6 percent per annum for a three million loan amount payable in 20 years at a one year fixed term
But first, you must assess your current financial capacity to find out if you can pay for the money you need to loan. Ideally, your monthly salary should be able to cover the monthly payments at a lesser term after making a huge down payment. More importantly, the maximum amount a bank will agree to loan you will be based on your monthly income.
But if you are not liquid enough, a longer payment term with a smaller down payment would be best so that your finances aren’t stretched thinly. The key here is to be honest with yourself to plan your payments carefully.
After you have figured out the payment terms you are comfortable with, applying for the loan can be a bit tricky since banks are known to be strict in their application process. This involves the submission of documents such as financial statements, ITR, certificate of employment, and pay slips that go through a thorough assessment before getting a stamp of approval.
In the case of in-house financing, it is an option typically for buyers who are not qualified or were not approved for a bank loan. It is a flexible payment term offered by the developers themselves, which is less stringent in terms of qualification, but at the expense of higher interest rates.
INCREASE YOUR CHANCES OF GETTING YOUR HOME LOAN APPROVED
You probably know by now that getting approval for a loan is a huge deal in finally owning your first condo unit, so it is crucial to know what it takes to make this happen.
Here are a few tips to boost your chances of getting your loan approved:
Improve your credit score
Banks assess their borrowers’ capacity to pay out a loan by going over their credit score. You can also know the status of your own credit score in two ways: 1) through the Credit Information Corporation (CIC) or 2) through the CIBI Information, Inc. All you need is to submit the required documents, and they will provide a credit report detailing both your credit history and score.
If you have a low score, you can make improvements by reducing your debt and paying your bills on time. Make it a habit to keep your credit card balances low and don’t apply for new cards that you don’t even need. Assuming you don’t have previous loans to base your credit score from, banks generally base your capacity to pay on your monthly income from a stable job.
Being in huge debt is never a good situation to be in when you’re trying to get a loan approved, so it would be best to learn how to manage them to avoid getting denied on your application.
Take charge by making a list of all your debts and get the total amount together with the monthly payments and their due dates. This will let you see the bigger picture and allow you to plan how you would pay them off on time.
Maintain a stable employment
You won’t be able to make your payments if you don’t have a steady source of income. If the bank finds out you can’t keep a stable job, your chances of approval are slim to none. In fact, finding a secondary source of income is ideal if you aim to be more comfortable financially.
Swiping that card to make a huge purchase is counterintuitive and can completely derail your application. This is particularly true when you are already near your credit limit, so take it easy on your expenses until you get that approval.
Make a large down payment
Making a large down payment on your condo unit can work to your advantage when applying for a loan since the larger the amount, the more effort you’ll put in to avoid losing it from foreclosure.
Keep in mind banks are willing to give loans to people who can and will pay them back, so having a large amount put down on your condo unit is a good sign that you are in control of your finances.
Prepare all necessary documents
Since banks have imposed stringent measures in approving loan applications, it is imperative to submit complete documents for easier approval.
While each major bank may have different requirements, they ask for the same basic documents listed below:
• Duly accomplished application form
• Proof of income documents
• Identification cards (one to two of the following:)
Passport
Driver’s license
PRC ID
Postal ID
NBI clearance
Police clearance
GSIS e-Card
SSS ID
Senior citizen ID
BIR ID
• Collateral documents
Contract to sell
Reservation agreement
Endorsement letter
• Supplementary documents (if needed)
Consider getting a co-owner
Having a family member apply as a co-owner of a housing loan can work to your advantage since you can share the responsibility in paying off your loan and ease your financial burden. You will have a higher rate of approval while being eligible for a larger amount to loan with tax benefits to boot.
GET PRE-APPROVED FOR A MORTGAGE
After you have qualified for a loan and passed all the requirements, your financial institution of choice will grant a pre-approved mortgage after a thorough income and credit check.
It should be noted that a pre-approval is still subject to an evaluation after a specific property has been chosen. It may even be canceled if the property is deemed difficult to resell due to a number of factors. But if you are cleared, you’re ready for the next big step.
Now that you are in the pivotal stages of purchasing your own condo unit, you must go through a few more steps before closing the deal. It is crucial to be in constant communication with your real estate agent during these times so that he can help you keep track of all the paperwork needed for filing.
Before anything else, make sure you take advantage of promos or discounts the developer might offer to get the best deal. You can also check with your bank for promo interest rates. These could significantly help you financially.
On closing day, you are expected to finalize your mortgage, pay the seller and settle the closing costs, sign the contract, and have them transfer the title to you before making arrangements to register the purchase as a legal public record.
It is also during closing your unit is set to be turned over to you, whether it is fully paid or if it will still be settled through a continuous payment from your bank loan. This is done through a bank guarantee released by the bank and given to the developer, serving as an agreement between them that the bank will be settling the balance after the obligation has been transferred to them.
