You have a growing family and quite a sum saved up in the bank. Now, you’re considering taking that big leap and buy a home of your own, an investment that you can pass on to your kids. What are the things you should consider?
Tet Bugayong, marketing services manager of Property Company of Friends (Profriends), discussed the basics of investing in your first home during SmartParenting.com.ph's Money Strategies for SmartMoms workshop, co-sponsored by Pro Friends and held at Café 1771 in El Pueblo, Ortigas last September 22.
Owning a home is every Filipino’s dream. Unlike renting, the money you pay monthly doesn’t disappear into someone else’s pocket. However, buying a home is one of the biggest financial decisions you can make -- it will not be an easy decision, requiring a long-term foresight on your part, and it definitely doesn’t come cheap. Based on Bugayong's checklist, here are the first things you need to ask yourself to see if you’re ready to be a homeowner:
1. Can the family income handle monthly mortgage payments for at least a decade? It is likely that you’ll be paying for loans and mortgages for a minimum of five to seven years. In fact, Jeannette Castillo, a branch manager for a savings bank in San Juan City, told SmartParenting.com.ph that it can take as long as 10 to 20 years to pay back a home loan in full.
2. Will you pass pre-approval for a home loan? Just because you have enough for a down payment doesn’t automatically guarantee that you’re financially ready to buy a house. “Very few people have enough cash to buy their first home without a mortgage. Most need financing to afford today’s home prices,” says Bugayong. Before anything else, visit your bank and check if you’re qualified for a home loan.
According to Castillo, a home loan at a Philippine bank often requires the borrower to submit a bank statement from the past six months and a latest income tax return statement or payslip for the past three months. This is to check for the borrower’s ability to pay for the loan. Importantly, the bank will also check if the borrower has any existing loans or debt that can include your credit card history, which is also big factor on whether your home loan gets approved or not.
Castillo adds that if you're buying a house that has a previous owner, it is your responsbility to make sure there are no issues with the title and deed of house. Complete requirements, no outstanding balance and a tangle-free house title will up your chances of getting approved, she adds.
3. Are you mentally ready? Timing is a big factor when buying a home as it will take a lot of your time, energy and money. “Purchasing a home is like having having a child altogether again. Parang dalawang anak ang aalagaan mo, medyo mahirap ‘yun for a first time mom,” says Bugayong. Make sure you and your partner are not just financially ready to start buying a home but you're also physically, psychologically and emotionally prepared, she adds. If you have a lot on your plate already, you might not be able to devote the necessary attention needed to make informed decisions when buying a home.
4. Do you have enough funds for an emergency without dipping into your home payments? Part of being financially ready to buy a home is having an emergency fund bank account, explains Bugayong. That extra cash should not be taken from your home loan budget -- missing your amortization can have big consequences.
Take Pag-IBIG’s housing loan for example. Failure to pay will incur a penalty 1/20 of 1 percent of the amount due. It may not seem like much, but that’s for every day of delay, so miss a week of payment and your penalty stacks up against you. And, if you miss three consecutive monthly payments, your loan will default, and worse, Pag-IBIG can endorse you for foreclosure. When it comes to banks, take note, the house is considered as the collateral of your loan, says Castillo. Having enough money for emergencies can save you from having your home taken away.
5. How is your bullsh*t radar? And by this radar, we mean you as the target. Sometimes when we fall in love with an idea we tend to ignore reality. When you embark on buying a home, you need to be honest with yourself and gauge your situation. Settling home payments is a long-term plan, which not only includes amortization but also taxes and possibly maintenance and insurance. “First-time buyers often believe buying a home will be easy. Giving up that misconception and being realistic about the time, effort, money, stress and hassle involved is an important step toward being ready to move forward,” says Celine.
So if you've answered no to all the questions above, it means you need to wait and take the time to do a lot research and info gathering. Talk to experts, Bugayong suggests. Reach out to the right people who can show you the ins and outs of real estate and purchasing a home. Don’t be shy to ask questions and to keep asking them if there’s something you don’t understand. “Lahat ng tanong mo dapat natanong mo muna before you make irrevocable decisions.”
So when the opportunity arrives, you're more than prepared.