6 Smart Tips in Buying Your Dream Home

Thinking of buying your dream home? Check out the following six tips to help you calculate for the home you can afford:

 •           To determine how much you can afford, you need to look at three elements: How much funds you have for a downpayment, your loanable amount or how much the bank will lend you; and the monthly amortization or what amount of loan payment your monthly income can sustain.

 •           The next step is to determine the selling price. This is the purchase cost of the property you intend to acquire. This is the amount that is paid to the seller and does not include other acquisition costs; specifically those related to any mortgage loan that the buyer assumes to be able to purchase the property.

 •           Know how much downpayment is required and find out if this is within your budget. The downpayment is the difference between a property’s selling price and the amount of the mortgage loan you can get from a bank. If you are a first-time buyer, your savings will give you a good indication of how much you can use as a downpayment. If you are planning to upgrade your residence, you can add to your savings the estimated gain from the sale of your existing property.

 •           Know how much the bank will lend you. This is your loanable amount and will depend on your income and the appraised value of your mortgaged property called collateral. Your capacity to pay is computed on your current gross annual household income while the loanable amount of a property is a percentage of the property’s appraised value. The loanable portion of a property also depends on the type of property (house and lot, condominium, or vacant lot). For example, the loanable portion of a house and lot is 80% of an appraised value less than $30,000.00.

 •           Can you afford the monthly amortization? The monthly amortization depends on three things: Loan amount, which is determined by your income and value of collateral; the loan interest rate or the rate applied to your loan at the time of loan release; and loan term which is the number of years you will pay for the loan.

 •           When availing yourself of a housing loan facility, look for special features that will make it possible for you to calculate how much you will be paying over the next couple of years. With the unpredictable market situation, getting a loan that offers a fixed interest for a certain period of time will not only help you plan your finances more accurately, but will also provide you with stability, against rising market rates.