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Loans for First-Time Homebuyers: How to Finance

For first-time homebuyers, the financing process may seem daunting. However, the procedure doesn’t have to be complicated or stressful with knowledge and guidance. Getting a loan for your first home purchase could be easier than you think.

Many different types of home loans are available to first-time homebuyers, making the process seem overwhelming. But before getting into the types of loans available, it is vital to understand how to finance. Below are some tips to help you know about first-time home buyer loans:

Acquire a Mortgage Pre-approval

Banks offer a pre-approval examination to assess your creditworthiness; the results determine how much you can borrow from them and your likelihood of repaying the loaned amount. Your annual gross income and other credit information, such as credit cards from different banks and existing loans, are among the questions. Once approved, it’s time to start looking for a house to buy.

Bank Loan Fees

Banks typically provide the quickest loan transactions, but this convenience comes at a cost. They charge for additional services such as handling fees. Banks include mortgage redemption insurance (MRI) and fire insurance in their loan packages for added security.

Consider government home financing through the Pag-IBIG Fund or the National Housing Authority if you want to avoid paying bank loan fees for buying your home.

Prepare a Down Payment

On average, most local banks require a 20% down payment on a house and a 10% to 30% down payment on a condominium unit. If you want to reduce your total mortgage balance and monthly amortization, it’s best to make large initial payments.

Other counting houses provide flexible payment options that allow you to pay on your terms. You can pay more when you have extra money and pay less when your budget is tight, without incurring additional fees!

You should also budget for property taxes, housing insurance, closing and moving costs, and other notary stamp requirements, which will add to the home’s total cost.

Types of Housing Loans in the Philippines

There are two types of housing loans in the Philippines: conventional and flexible. You can select either of these two depending on the terms you prefer.

Conventional

A conventional mortgage requires you to make fixed payments over a set period. This is ideal if you want a predictable payment scheme and plan your finances ahead of time. A conventional mortgage, also known as a conventional loan, is any type of home buyer’s loan that is not offered or guaranteed by a government entity. Conventional mortgages, on the other hand, are available from private lenders such as banks, credit unions, and mortgage companies.

Flexible

Flexible banks typically offer this type of home loan. Depending on how much you deposit, you can control the interest rate of your flexible home loan. You may also begin principal repayment at any time. You must only pay interest on the amount borrowed, not the loan amount sanctioned. You can also reduce your interest rate by making part-payments when you have the money. As a result, Flexible loans end up saving money.

Housing Loan Options Based on Financing Scheme

Bank funding

Housing loans are available from the majority of the country’s banks. However, the application process can be rigorous, with loan amounts and terms varying from bank to bank.

Pag-IBIG home loan

This government agency can provide you with a housing loan if you are a Pag-IBIG member. This is open to salaried, self-employed, and OFW workers aged 65. It also allows you to borrow up to PHP 6 million to purchase a residential lot, house, or condominium.

In-house financing

Real estate developers can provide you with a housing loan. However, this loan option has a shorter term of up to five years.

Adulting can be frightening for some because you are now more concerned with your future and investing in the right pieces, properties, and types of investments to achieve your life’s dreams and goals. Some begin by purchasing a car, some buy a home as an investment, and others start by managing their finances and bills. But, whatever it is, make a checklist ahead of time, so you aren’t surprised by your financial problems in the future. And keep in mind that you have a bank on which to fall back if you decide to take a giant leap in life.

Although it is challenging to secure financing as a first-time homebuyer, you can apply for a loan with some help from your real estate agent.

First-time Homebuyer? Here Is How You Can Avail Tax Benefits

Published Date : Article Buying house Buying Property Buying Tips Community Guide Financing Housing tips Industry News Investment Tips Property Recommendations Real Estate 101

One of the most expensive purchases you will ever make is buying a home. Although it may seem daunting, many tax benefits are available for first-time homebuyers. Many first-time homebuyers are unaware of their tax benefits when buying a house. Well, if you have plans to buy a home for yourself, it is highly recommended that you talk to an accountant or a financial advisor and discuss the available tax benefits.

The government has several schemes and policies to make buying homes more affordable. These schemes are mainly aimed at first-time homebuyers. If you borrow money to buy or build a family home, you can deduct the mortgage interest from your taxable income. Sonny Angara, a senator, introduced Senate Bill No. 2148 to address this issue. It proposes tax breaks for qualified first-time homebuyers in mortgage interest deductions.

Explanation of the Bill

According to the bill’s explanatory note, a home provides a person with a sense of security and stability. However, many people rent rather than buy their own homes, not because they want to, but because they don’t have a choice.

Houses are indeed a substantial financial burden. As per a recent study by the National Economic and Development Authority’s Statistical Research and Training Center, 1.5 million of the 21.5 million Filipino households are renters.

According to the bill’s author, many developers currently offer reasonably priced housing options with easy payment terms and low down payments for homebuyers. However, Angara pointed out that financing is still one deterrent to homeownership. High-interest rates charged by developers and banks deter many potential homebuyers from purchasing. As a result, the senator proposes this new bill, which will provide a tax break to people who want to buy a home.

How Will the Bill Benefit Filipinos?

One of the bill’s standout features is the Home Mortgage Interest Relief. It intends to provide tax breaks to individuals who purchase a home. The bill’s goal is to assist Filipino families in finally purchasing their first family home. As a result, any interest paid on loan to acquire or construct a family home during a taxable year is deductible from your gross income.

Furthermore, when this bill becomes law, it will eliminate the interest rates on your loan. As a result, you will only be required to pay the principal amount of your property. This means you will no longer need to worry about increasing interest payments. Furthermore, you will benefit from tax savings due to this relief.

The bill intends to encourage more lenders to provide affordable financing to first-time homebuyers who are the most in need of shelter.

Senator Angara hopes that this legislation will address the country’s housing shortage, which is currently estimated to be 3.9 million housing units. It hopes to persuade more lenders to provide affordable financing to first-time homebuyers who are the most in need of shelter.

However, once enacted, the law will only cover loans that meet the following criteria:

Loans from reputable Philippine banks, the Home Development Mutual Fund (Pag-IBIG), and duly approved cooperatives.
Loans that are used solely to construct or purchase a family home.
Loan amounts not exceeding Php2.5 million.

As a first-time homebuyer, you have to take advantage of the tax benefits that come with buying your home. The government is offering attractive tax breaks to those who buy their own homes, and it’s only fair that you make use of these breaks. Take some time today to learn more about how you can avail of tax benefits when buying homes in the Philippines.

How to be Financially Prepared to Buy Your First Home?

Published Date : Article Buying house Buying Property Buying Tips Community Guide Financing Housing tips Property Recommendations Real Estate 101

A first-time home purchase is an exciting but stressful experience. Before taking the plunge, it is essential to learn and understand all of your options. Financing a home can be complicated, especially if you are a first-time homebuyer who has never experienced the process before. If you’re ready to buy your first house but don’t know where to start, read on as we explore some tips for saving money and preparing yourself financially before buying your first home.

Maintain Your Budget

Where does your share of your monthly income go? What do you spend on rent, groceries, dining out, shopping, and entertainment? Begin by analyzing this. Make a budget after categorizing your expenses and determining how you’re spending your money. These days, you don’t have to do anything manually. There are various tools available to assist you in creating a budget. You can compare your earnings to your expenses and track how you spend your money.

This can assist you in reducing frivolous expenses and saving for your down payment. You don’t have to eliminate your lifestyle expenses; simply lower them. For example, if you currently eat out 10 times per month, reduce that to 5 or 6 to save money. Similarly, instead of purchasing ‘branded’ groceries for home cooking, consider switching to ‘house brands’ or generic ones, which may be less expensive. The same is valid for preceding expensive gym memberships to work out at home, taking public transportation to work, and so on.

Set Aside Funds for Future EMIs

Purchasing a home without a home loan appears to be impossible today. And home loans aren’t cheap. You’ll have to pay EMIs every month, which will most likely be much higher than the rent you’re currently paying. So, use an online EMI calculator to figure out how much you’ll need to set aside each month for your mortgage repayment. Once you’ve determined an amount, it may be a good idea to begin channeling your savings and investment returns to set aside that amount every month even before you start repaying your EMIs. This will be a good practice run for how you’ll handle your finances once the EMIs start.

Acceptable Credit Score

Another financial stumbling block for potential homeowners needing a mortgage is maxing out credit cards and paying bills late. It will be challenging to qualify for a mortgage if you have a poor credit score or, worse, no credit history at all.

Understand your ability to pay your monthly bills and the total amount of debt that could potentially impact mortgage payments in the future. An acceptable score can be challenging to assess because it varies depending on which lender you ask.

However, maxed-out credit cards aren’t the only thing on your mind. If you are consistently 30 or 90 days late on your other bills, your credit scores will drop again, and banks will refuse to lend money. If you are eager to buy a home, you need to act and work on your credit score.

Capacity to Pay Closing Costs

A home mortgage comes with several fees, and if you don’t know what to expect ahead of time, you could be in for a harsh financial awakening.

Although closing costs vary by the lender as borrowers pay for a different appraisal, credit report, attorney/closing agent fees, recording fees, and processing/underwriting fees, closing costs are typically 1% of the loan amount.

However, fees can account for up to 3% of the loan amount, and lenders must provide borrowers with a comprehensive good faith estimate of the fees that costs may incur on a specific type of loan.

While most attention is focused on preparing a sizable down payment, there is more to it than just your mortgage payments. Lenders consider income and debt-to-income ratio factors, but your credit score is also essential.

As you’re saving for your down payment, it’s important to remember that saving for a home is a marathon and not a sprint. You need to be patient and stick with your savings plan. If you keep working on it consistently, you’ll get there in the end.

With compliance with the right strategy, you will buy your house in no time!