Shopping for your dream house requires you to be smart and knowledgeable of how much you can really afford. Especially, when you badly need to avoid that disapproval for a bank loan or bank financing. When you are seriously considering buying a home or property, you have to go against the urge of just grabbing what you think is meant for you. So, before you go on another property “tripping” with your chosen real estate agent, examine first your budget and how much you can really afford. Here are some ways how:
- Equity or Down payment
The real estate industry is growing as more home-buyers now find it affordable to start paying for their dream homes easily. It will not hinder you from owning a house even if you do not have cash for full payment from your savings account. A lot of home developers in major cities, for example, Baguio City, make their real estate projects more attractive during the pre-selling stage. It is common to have a down payment of 20 to 30 percent of the total contract price and also depending on the location of the property.
You can find down payments are payable for a few months without interest depending on the property desired. But to be able to see the bigger picture, you need to know your maximum mortgage amount to have a good and clear idea of how much you can spend on a house. Prospective buyers deal with the remaining 70% balance of the property by raising funds from a loan from a bank, PAG-IBIG or via an in-house financing scheme.
- How much money can I borrow?
You need to be realistic and gauge your capacity to pay when raising capital through a loan or mortgage. Whether it is through bank-financing, PAG-IBIG or other fund providers, you must need to know how they will assess you by asking yourself questions like: How much money will they lend me? Will my loan application be approved? Will I qualify for a bank loan?
Most banks that offer home loans consider determining how much they will lend a borrower by their monthly mortgage payment. This figure should not exceed 28% to 35% of your gross monthly income. For instance, if you and your spouse have a combined monthly income of Php 130,000, your mortgage payment should not exceed Php 39,000 at 30%.
- Aim for that loan approval
Another way to afford a real estate property is by raising funds through the property owners. Developers have not only eased entry requirements to get more and more people to buy from them, they have also sweetened the deal with more flexible payment terms.
Don’t just jump right in, though. Buyers who opt to use in-house financing services know that they are facing more costs. With the capital being able to be raised with less strict evaluation, these in-house financing services usually cost higher as the interest rates are higher. Apparently, there is no free lunch in the real estate industry. You are paying for the convenience: minimal paperwork and reduced processing time.
- Credit standing and history
Financial advisers would advise that if you are qualified for a real estate or housing loan from your bank, it is a smarter and a wise choice to go for a bank loan. The reason behind it is that, when you are engaged in a bank loan, it is viewed as an opportunity of establishing and building your credit record with your chosen bank. As your bank credit improves, then you have a better chance to take another loan in the future and build your credit standing.
Car loan or credit card payments can be in your debt list, but always remember that your mortgage payments should not exceed 40% of your gross monthly income. In some cases, banks will disapprove a mortgage until your debts are eliminated or lessened. Maintaining a good credit standing will make you eligible for further use more money from banks in the future. It can be used for either investment or for another house.
Better choices require careful and calculated considerations. With that said, let this added information encourage you and to take wiser steps to fulfill your dream today and in the future.