How Do You Finance Your First Home?

Buying a home is a default dream for many Filipinos. Even if you’re perfectly fine living with your immediate family now, in the future, you may wish to lead a more independent lifestyle and be based in a house that you can truly call your own. However, the price of owning a house and lot or a condominium unit in the Philippines can be prohibitively expensive, especially if you’re planning to situate yourself in a highly urbanized area. And unfortunately, the cost of buying your own home in many major cities around the country is expected to rise in the coming years.

first homeMost Filipinos are unable to buy a real estate property by spending their own money. A lot of would-be homeowners use their savings, but the amount that they have on hand is often supplemented by funds sourced from loans. Philippines banks and government agencies offer plenty of financial products that are specifically designed to help Filipinos purchase their own homes. If you’re seriously considering buying a house in the near future, then it’s worth taking a closer look at the financing schemes that are available to you.

Home Loans from Banks

If you’re looking for flexibility, then retail banks offer a wide variety of housing loans for Filipinos from all walks of life. Take note, however, that banks can be quite selective when it comes to borrowers. To improve your chances of getting approval, you need to adhere to the bank’s rules and requirements. Otherwise, your loan might not get approved, or you’ll get higher fees for failing to meet the terms you agreed to.

Once approved for a home loan, you can supply the down payment for the house that you want to purchase. After this, the bank will pay off the balance, and the property will be under the bank’s name as collateral to your loan. Once you complete paying for the housing loan, the ownership of the property will be transferred to your name.

Government Housing Loan

If you’re on a tight budget and you’re not in a particular hurry to own a home, then a housing loan from a government agency can be the option you’re looking for. The terms offered by government housing institutions can last up to 30 years. Just like bank loans, however, you need to complete the property’s down payment first, then the balance will be financed through the government agency.

In-House Financing

In-house financing options are offered by the developer of the property that you want to buy. Most developers will give you 5 years to complete the payment of your home, which is much shorter than that offered by most retail banks. In-house financing can also be spot cash payment or deferred cash payment.

Spot cash payment will require you to pay for the property in full within a short period of time, such as a month after reserving the house. The developer can offer the buyer a hefty discount on the total price of the home, and they can get full ownership of the property in a short amount of time. Deferred cash payment will require you to pay off the total amount of the property in, say, 2 years, for example. You’ll need to divide the total price of the property equally by the remaining months of the term and pay for it within that span of time. This will enable you to purchase a home without worrying about interest rates.

Considerations When Choosing the Right Home Financing Products

Some people think that you can only get a housing loan if you’re planning to buy a real estate property, but this is not the case. You also have the option to look for appropriate financing products if you want to construct a housing unit, improve your home, refinance your housing loan, or use your home equity to borrow money. You’ll find that most retail banks offer loan programs that match these particular needs under their housing loan products. You simply have to shop around to find the loan that best matches your particular needs.

At the same time, though, you have to build yourself up as an ideal customer for a housing loan. You have a better chance of getting your loan approved if you’ve built a working relationship with your preferred bank and if you’ve demonstrated your capability for fulfilling your financial responsibilities in time. The latter can depend on your income, the stability and continuity of your livelihood, the amount of loan you are applying for, and the number of dependents that you have, to name a few factors. Having paid off a previous loan in full and in due time can also serve as a good testament to your sense of financial responsibility.

Before you commit to any agreement, make it a point to thoroughly review the fine print of the housing loan that you’ve been granted, such as the interest rate, the terms and conditions, and the payment details. On top of everything, make sure that you are wholly prepared to take on this new financial responsibility for the next few years. Being fully aware of the risks and advantages of this significant financial investment will play an essential role in seeing your housing project to completion and being a bona fide homeowner yourself.

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