How To Choose The Right Home Loan

Contributor: Patricia Bation (Dot Property Philippines)

Every Filipino deserves to own a property that they can call their own. 

Fortunately, home loans are there to help the common people purchase their dream home even if they don't have substantial amount of money in their bank account. There are tons of home loans available in the market today but how will you know that this mortgage is the right one? Below are some tips on figuring out which home loan works best for you. 

Figure Out Your Capacity

Income, credit score, and debt service information are some factors that lenders consider when looking at a home loan application. Of course, income shows if you have the capacity to pay for the loan while credit scores show if you are financially responsible. Figure out first how much loan you can pay every month before applying. Remember the rule of thumb: do not spend more 30 percent of your income to your mortgage. 

Choose The Right Property

​Another factor to consider is the price of the property that you're about to buy. Make sure that the property's price fits your finances. Choose affordable homes at property portals such as Dot Property Philippines or consult a real estate broker.

​Take A Look At Your Financing Options

Again, there are tons of financing options available in the Philippines. Below are the three major modes of mortgage in the country and their benefits:

• Bank loans - This is the most common financial option for mortgage in the country. Home buyers apply for bank loans because of its competitive interest rates. But bank loans require a huge amount of paperwork, IDs, and application forms that can often be stressful especially for first time home buyers.
• In house financing - Some developers offer in house financing for their properties. Some only require proof of income and down payment. But expect a higher increase on interest rate in  the coming years.
• Institution issued loans - Social Security System (SSS) and Pag-IBIG are the two institutions that offer affordable home loan. In SSS, members who are not older than 60 years old may apply for a loan as long as he or she has made 24 continuous contributions. Meanwhile, the Pag-IBIG fund offer long loan tenors  for members who contributed 24 times continuously. A member can get a maximum loan up to PHP 6 million.

Buying your first home can be tedious and daunting but with the right preparation, the whole process should be a breeze. Create an informed plan and remember to don't be shy to ask questions.