Jun is a 31 year old Software Engineer in one of the Multinational companies in Makati. At his age, he is earning pretty good money and he is getting married next week to his girlfriend of seven years, Jane. With Jun’s marriage coming into play, he now wants to buy a house for his future family, but the thing is, he doesn’t know where to start. So he asks around, ask his parents, some friends and the Internet. He finally decided to get a mortgage loan since he doesn’t that a lot of money to buy it in cash.
Later that night, he tried to Google “house and lot for sale” and he saw a lot of information, though every information make sense but it is a lot and too generic. Like the normal Juan, Jun and I have a lot in common with regard to buying a home. With a lot of information the Internet is trying to feed you with, it becomes confusing and makes research seem like work. Luckily, with some insight from experts, buying a home can be as easy as 1-2-3 but with a few reminders on the common mistakes committed by the ordinary Juan. If you want to know more, read on.
Applying when you’re Not Qualified
Banks, by nature, are generally eager to offer mortgage loans to qualified home buyers. In the Philippines, a qualified mortgage loan applicant means that you are fit to with the banks qualifications like the amortization you have to pay is 30% of your gross monthly income and essentially have money enough for down payment. Also, some banks require a minimum income level of P40, 000/month. If you don’t fit the criteria, they’ll have no problem rejecting your application. So before you apply you’ll want to make sure you’ve done the necessary preparations and are not fighting a lost cause right from the start.
Delaying of your Application
Banks take up to as fast as ten days to as long as two months on approving your loan depending on the case of the borrower. In reality, if you already picked out a design for your home and already paid for the down payment, house construction costs comes in really fast and might even cost you more if you continue to delay your application. Just imagine the paper work and a financial check that banks put to this application process, delaying your application is not a good idea.
Getting the Lowest Interest Rate and Nothing Else
You’re going to borrow a big sum of money. Obviously, you’ll sign up with whoever offers you the lowest interest rate. Right? To a certain extent, this is true. Your priority lies with getting the lowest possible interest rate, but you shouldn’t forget about things like margin of financing, lock-in period, and simple stuff like making sure a branch is within your area. Remember to look at the big picture and how much should you really be paying at the entirety of the loan.
Opting for short-term re-pricing
Your aim is definitely to get the best interest possible and you opted for a short-term re-pricing. Usually these lower interest rates are only available on a promotional basis. Interest rate will vary depending on the market interest rate (which most of the time higher than the given rate) and if you do such a thing, you are actually paying more than you should. So who wins? It is better if it is you, the borrower. Always think long-term. Always!
Declaration of finances
Banks in the Philippines always ask for your credit history, like declaring your credit card/s, annual salary and properties owned or loaned which is part of the normal process. What consumers don’t know is that these banks cross-reference records with other financial institutions. One wrong declaration of your asset or liability can decline your mortgage loan application and delay you in creating your dream home.
Home loan involves fees, charges and even home insurances that may come as a surprise for the inexperienced home buyers. Some banks absorb part of these charges, whilst others may not. Most home buyers have limited funds (and hence the need to take a mortgage loan), so it is imperative that you understand these charges involved before you commit.
You know this but you tend to neglect insurances because it is costly. But, do you know that if insurance too is basic in borrowing? Banks often require fire insurance and mortgage redemption insurance – all in which is essential if the worst case scenario happen. An MRI is a life insurance policy with the bank as the beneficiary in case of the borrower’s untimely death. Yes it is pricey but it is more costly when something bad happens to you. Don’t take that risk, it is not worth it.
Yes, negotiating for your home loan interest and the cost of the house is possible. It’s just that you are not asking the home loan officer or the Realtor. You should definitely try this and make sure you have plenty of options like the option to walk away when they don’t give in to your reasonable requests. After all, if you feel confident that you are qualified, you have the last say to the contract!
Not Reading the Terms & Conditions
Put some effort to read all the fine prints for anything that involves money especially on mortgage loan agreements. If you don’t have the capacity to do so, make sure you get the loan officer to point out all the things that matter (such as loan amount, interest rate, installment amount, loan period, margin of finance, lock-in period, early settlement penalty and fees & charges). The general rule: if it doesn’t appear in your agreement, it doesn’t take effect. Period. So if your home loan shows a lock-in period of 3 years whilst your officer is telling you it’s 1 year, the former wins. All the time.
Now Jun is well-equipped with the knowledge that he needs when taking out a mortgage loan. All he needs is to make that call and secure that contract. With these tips and cautions, you can get the best deals offered in the market. Image from http://elitechoice.org/