Being a homeowner is the dream of many Filipinos. However, most of us are hindered by one thing: money. Financial preparedness is a requirement for becoming a homeowner. And since a house is perhaps the most expensive thing you will buy in your lifetime, you have to be ready to make the long-term commitment it will take to own a home.
So how do you go about being financially prepared to buy a home?
Understand the costs
As early as now, you have to understand how much it takes to buy a home. It’s more than just the down payment and the succeeding amortization. There’s also closing costs, property taxes, legal fees, maintenance expenses, furnishing expenses, and many other things that you have to shell out money for. Once you have the proper expectations of the financial obligations of buying a home, you are one step closer to becoming prepared for it.
Assess your current expenses
How can buying a house affect your current expenses? Chances are, you’re already paying for a lot of necessities, including food, rent, health insurance plans, transportation, and more. So, how will amortization and other housing expenses fit into that equation? If you are making enough money to accommodate a monthly house payment without compromising your basic needs and savings, then you are likely ready to buy a house.
Determine your goals
Where do you want to live? What kind of house do you want? How many rooms do you need? Identifying your goals for the home can give you a clearer picture of how much money you need to prepare. For instance, if you want a 2-bedroom house in the suburban area, you can set your budget according to the housing prices in that particular area. After this, you can plan on how you will save money for the down payment, along with the other costs included, and make a timeline of your plans in the future.
Save, save, save
The hefty down payment is usually the deterrent for many aspiring homeowners in the Philippines. A 20% down payment for a 2 million peso home is already a whopping 400,000 pesos! Unfortunately, unless you have an inheritance or a very high-paying job, it can take many years to save up for this amount. Nevertheless, it is a necessary sacrifice that you have to make if you want to have your own home.
You can also opt to get a zero down payment deal or offer a down payment that’s lower than 20%, but keep in mind that you will end up paying more in interest for the entire life of the loan. This can be a suitable option if it will take too long for you to save 20% as housing costs continue to rise, but you have to know the implications of putting down less money.
Apart from the down payment itself, you have to have funds for other expenses that come with homeownership, such as property taxes and maintenance. More than that, it is essential that you have an emergency fund for unexpected costs that might come your way. In general, it is wise to have at least three to six months of living expenses saved before you buy a home. In case you run into an emergency, you have a financial safety net to catch you.
Do your research
When it comes to buying a home, there might be jargon and processes that you might not be familiar with. That said, doing your research as early as now can help you avoid getting confused when you finally pursue your plans of buying a house. An experienced broker can guide you through the process and explain unfamiliar concepts to you. Still, it is better to have your basic knowledge to make the home-buying process easier for everyone involved.
Paying for a house can take a long time
Depending on the type of loan you choose, the length of a housing loan is usually fifteen to thirty years. Before buying a home, you should be mentally and financially ready to pay a significant portion of your income to your lender for more than a decade. So if you are not willing to commit yet, hold off on your plans for now.
It is every Filipino’s dream to have a house to call their own. Whether you want a simple abode in the province or a fancy condo in the city, you must be financially prepared to make such a huge undertaking that can affect other aspects of your life.
Are you planning to buy a house soon? What kind of preparations are you making, finances-wise? Share your thoughts in the comments below!