Buying a condo unit involves millions of pesos and thus poses an acid test on your financial strength, whether you’re buying it as an end-user or acquiring it as a rental property investment. Since most of us don’t have those bundles of money stashed away, the lenders from whom we’d seek home financing would naturally put our creditworthiness under microscopic scrutiny.
Here are some steps to help ensure that you can flex enough financial muscle to bag that condo deal.
Beef up your credit rating
Your financial stability or lack of it would be the first thing that lenders would assess if you apply for a condo loan. In the U.S., this checking process is easily done through credit scores determined by established rating agencies. This process, though, is still being developed in the Philippines, and so your creditworthiness would be based on your bank statements, tax records, and proof of income.
Being employed in a stable company for at least two years would help as this is a good indicator of your capacity to pay within the tenure of a housing loan. Having a spouse working with a well-established firm is an advantage as well, as your partner’s income counts too in a lender’s assessment of your purchasing power.
It’s also wise to trim down credit card debt and avoid unnecessary or frivolous spending. Your credit history can be collated not only from government agencies but also from credit card companies and their collection agents.
Settling your unpaid debts is another way to boost your creditworthiness. Besides impressing a lender that you are a responsible borrower, this will put you on the right mindset to plan that road map of having your own condo unit.
Go for the most liberal downpayment options
Choose a condominium development like the Avida Towers Aspira that offers flexible payment terms which complement the leverage you get out of having a good credit rating.
If you have established your creditworthiness, you can spend the least amount possible to buy a condo since a lender would finance as much as 80 percent of it. This is called leveraging or using other people’s money in a real estate deal, a process that even lightens your financial burden with flexible downpayment offers like Avida’s.
Besides full spot cash on downpayment, this condo development notably has a no-interest, deferred payment terms of up to 24 months.
Prioritize saving for a full downpayment
Financial advisors generally recommend, for good reasons, that prospective home or condo buyers should have the capability to afford a downpayment. A substantial downpayment puts you in a better position to meet the financial burden of buying a residence via a mortgage to a lender.
With a full downpayment, for instance, you’d have a shorter loan tenure, smaller monthly amortizations, and lower interest rates. A spot cash downpayment in full is likewise a solid proof of your financial stability, which augurs well to you getting a housing loan.
Of course, in order to save for a substantial downpayment, you need to have strong discipline in your finances and savvy with how you save as well. One trick is to open your savings account for a home downpayment with the bank where you intend to seek a housing loan. This can make you one of their preferred clients, resulting in more generous housing loan terms. Beforehand, it is wise, too, to do some comparison-shopping and latch on with the bank with the most attractive terms and interest rates available on the market.
Be realistic in a condo purchase
Lastly but as important, you should set a realistic goal for the condo unit to aspire for and go only for those within your financial capability. To determine this capacity, one rule of thumb that financial advisers suggest is the “2.5 rule.”
With this simple approach, you multiply your total annual income by 2.5. The product roughly equals the price of the residential property your income can afford.
For example, if you’re married and you and your wife’s combined monthly take-home pay (after taxes and other deductions) is Php100,000, it indicates that the price of the property you can buy is up to Php3 million. From this ballpark figure, you can estimate how much money you would have to raise or save for a down payment, which at 20 percent of the purchase price should be at Php600,000. Do your own computations and find out how much you can actually afford and what you need to do to save for your downpayment.