How To Buy A House? – Step by Step Guide for First Time Home Buyers

How To Buy A House? –  Step by Step Guide for First Time Home Buyers

 

 

Buying your own house is one of the dreams of most of us. But how many of us really know what it takes to buy our own house? For first time home buyers, most do not have the idea about the process of getting a house. Some thought that once they paid the full down-payment, they can already move-in to their unit. Some thought that they just need to pay the monthly amortization, and that’s it, they can just live in the unit they bought. The fact of the matter is, there are certain steps and conditions before the Developer will turnover the house that you bought. I will discuss here in details the guidelines and procedures of the entire buying a house cycle.

Before I go to the step by step process of getting your own house, let me first discuss the method of payments in buying your own house.

METHODS OF PAYMENT

1.) SPOT CASH

This is when the buyer pay the amount of the house in full. If the house is worth P1million, he/she pays the entire P1million less any discount on Spot Cash Payment.  For those who are financially capable, who have a lot of cash, they usually make this method of payment in buying their own property.

2.) FINANCING

When a buyer can afford only to pay the equity or downpayment of the total contract price of the house, the balance of the price will be availed thru financing like Pag-IBIG, Bank or In-House Financing. For example, the house price is P1million and the required downpayment is P100K only, the balance of P900K will be availed as a Housing loan and will be financed by either Pag-IBIG or Bank or In-House Financing.

2.1) PAG-IBIG FINANCING

Pag-IBIG is a government institution that provide housing loan to its qualified members. Developers of housing projects are tied up with Pag-IBIG in the processing of housing loan of certain qualified buyers.  Pag-IBIG is the most used financing for affordable housing project as it offers longer loan term up to 30 years with a competitive interest rates.

2.2) BANK FINANCING

Bank also provides housing loan to a qualified borrower. As compared to Pag-IBIG, Bank offers a maximum loan term of 20 years only. With regards to qualification and requirements, Bank is more strict especially when you have cancelled credit cards or bad financial records.

2.3) IN-HOUSE FINANCING

In-House Financing is not actually a financing in my opinion. Unlike Pag-IBIG or Bank wherein they pay the loan amount in full to the developer, in In-House Financing, the developer will receive the payment from the buyer in installment, the term of the loan. And it is not recommended as compared to Pag-IBIG or Bank, Why?

  • First, the downpayment is usually bigger, ranging from 30%, as compared to Pagibig or Bank at 10-20% only.
  • Second, the loan term is set at a maximum of 5 or 10 years only, thus, bigger monthly amortization.
  • 3rd, the interest rates is more than doubled as compared to Pag-IBIG of Bank. There are developer who charges, 12-17% interest rate as compared to the standard interest rate of 6.5% for Pag-IBIG and Bank.

After covering the method of payments, let us discuss now the step by step process in buying your own house.

 

Step 1. Contact the Seller either the Licensed Real Estate Broker or the Accredited Real Estate Agent

Probably, you’ve stumbled in a website, online advertisement or facebook campaign and you’ve seen a housing project that caught your interest. If the project really got your interest, you then need to contact the seller regarding the details of the project as a first step in your quest for your first home. Please be advised that it is very important to deal only with Licensed Real Estate Brokers and Accredited Agents for you to be assisted well.

 

Step 2. Schedule a site viewing with your Broker/Agent.

To check the property that you are going to buy, it is advisable that you, yourself have seen it, for you to decide whether you want to buy it or not. If you’re outside the country, working abroad, you can delegate a representative, either your parents, siblings or relatives. Please note that there are available free tripping schedule of various developers.

 

Step 3. Choose and Reserve a Unit

Once you have made your decision to invest a house from a particular developer, it is now time to reserve a unit. From the available inventory of the developer, choose the specific unit that you wanted to reserve. Seek assistance with your broker/agent to choose wisely. They can guide you on the block and specific location of the unit based on the site development plan of the project.

After choosing the unit, it’s now time to complete the reservation by submitting your initial requirements i.e. valid ID, payslip/job contract to the site or reservation officer of the developer. You then need to fill up the Buyer’s information sheet, stating your personal details, source of income, etc… You will also sign the Reservation Agreement as evidence of your unit purchase.  Your agent will assist you on this matter. Please note that all your payment should be made to the Cashier or Site Officer In-Charge of reservation only. Agents or Brokers are not allowed to received payments in behalf of the Developer.

 

Step 4. Submission and completion of Requirements

Within 30 days after reservation, you need to submit the requirements needed. The requirements depend on whether you’re getting a housing loan thru Pagibig, bank or in house financing. The requirements also vary if you’re an OFW. Since most of our clients are thru Pagibig Financing, I listed here basic requirements if you’re getting a housing loan thru Pagibig.

Locally Employed

  • MSVS (Membership Status Verification Slip)
  • Certificate of Employment w/ Compensation Original
  • Latest Premium Payments (HDMF – 2 years orig.)
  • Latest 1 month Payslip original
  • Latest Proof of Billing / Cert. of Tenancy / Valid ID
  • Company ID (photocopy)
  • I.D. Pictures 1 x 1 ( 5 pcs )
  • Latest W2 / ITR Clear copy
  • Marriage Certificate/Birth Certificate/Spouse ID (clear copy)
  • Any Govt I.D. (2 valid ID) (clear copy, back to back)
  • Tax Payer’s Identification Card (clear copy)
  • Sketch of Residence Address

Overseas Filipino Worker (OFW)

  • MSVS (Membership Status Verification Slip)
  • Latest/Authenticated Copy of Job Contract
  • Latest Premium Payments (HDMF – 2 years orig.)
  • Latest 1 month Payslip / latest Remittances orig.
  • Proof of Billing / Cert. of Tenancy / Valid ID
  • Latest Passport ( photocopy )
  • I.D. Pictures 1 x 1 ( 5 pcs )
  • NSO Marriage Certificate/Birth Certificate (clear copy)
  • Any Govt I.D. (2 valid ID) (clear copy, back to back)
  • Tax Payer’s Identification Card (clear copy)
  • Sketch of Residence Address
  • Notarized/Consularized Special Power of Attorney (SPA) for authorized representative
  • Valid IDs of authorized representative

 

Step 5. Paying your Monthly Downpayment

The due date of your first monthly downpayment is usually 30 days after the date of reservation. There are instances wherein the due date can be adjusted depending on the Developer’s policy. Based on what is stated on the reservation agreement, you need to pay the downpayment on a specific terms like 12 months, 18 months, 24 months etc..

Most of the housing projects that you can avail are pre-selling stage, meaning, the house is for construction, not yet ready for occupancy. The advantage of this is that, the downpayment is stretch to an average of 12-24 months to pay, so it gives the buyer flexible payment terms that suits his/her budget. In contrast, ready-for-occupancy units (which is very rare and usually have if there are reopen/cancelled accounts), have shorter downpayment terms.

Once you have completed paying the downpayment and the house is already 100% constructed, your documents are now ready of housing loan process.

 

Step 6. Loan Processing

Loan processing is being done after paying the full downpayment/Equity and the house is already built by the Developer. It may take 3-6 months (batch processing) to process the loan either thru Pagibig or Bank financing. Typically, in a housing project, it is process by batch in Pag-IBIG so the processing time is quite longer as compared to individual loan application which will take less than a month.

 

Step 7. Loan Take Out

Once your loan is approved and taken-out . Developer will inform you of loan take-out and guide you on the next steps. The date of your first monthly amortization, is one (1) month after the release of your loan.

Just for clarification, I have received some comments that they thought, the loan will be given to them by Pagibig or bank. It is not that way, the Bank or Pagibig will pay the Developer (seller of the house) and you as a borrower, will start to pay the Bank or Pagibig thru monthly amortization 30 days after loan take out.

Please note also that the first 2 years of your monthly amortization if thru Pag-IBIG will be paid first to the Developer thru Postdated Checks. This is an agreement between Pag-IBIG and Developer for Buy Back Guarantee (for cases where buyer defaulted to make payments within 2 years)

 

Step 8. House Inspection

After the housing loan was released, you will now be scheduled for house inspection which we often called as “Punchlisting”. You will be checking your unit together with the engineering department.

If there are minor repairs or retouch , another re-inspection date will be set until house is acceptable. If all is well then to your unit, the key will then be turnover to you.

 

Step 9. Move-In/House Turnover

After accepting the unit, you are now ready to move-in. But wait, you are still bound to pay move-in fees, that cover, applications and deposits for electricity, water, lighting’s, garbage fee, association dues etc.

After that, you’re now totally ready for Move-in. Congrats to your own new Home.

 

I hope that this simple step by step guide help you understand fully the process of acquiring your first home.

 

All the best and More Power!

 

Regards,

Ralf Roger C. Tagao
CPA
Licensed Real Estate Broker

 

 

 

 

Hi, I’m Ralf Roger Tagao, CPA, Real Estate Broker & Entrepreneur. I’m engaged in Real Estate Selling of house and lot particularly located in Bulacan.

Who are Qualified to avail the Affordable Housing Program of Pag-IBIG?

Who are Qualified to avail the Affordable Housing Program of Pag-IBIG?

 

 

The Affordable Housing Program of Pag-IBIG under Circular 379 (which amended Circular 312) states that a qualified borrower with not more than P17,500 monthly salary for NCR and P14,000 monthly salary in other regions can borrow up to P750,000 and P450,000 housing loan, respectively.

The Circular states the eligibility requirements of a person who wants to avail a housing loan as follows:

1.) On Pag-IBIG Membership

  • Must be a member under the Pag-IBIG I Membership Program as evidenced by the remittance of at least twenty-four (24) monthly savings at the time of application;
  • A member, whose monthly savings are still short of the required number, may be allowed to apply for this program; provided, his total savings upon application is at least equivalent to 24 monthly savings based on the mandatory rate, inclusive of the employee (EE) and the employer (ER) counterparts;
  • A new member who wishes to apply for a Pag-IBIG Fund AHP may be allowed to do so; provided, he remits the required 24 monthly savings based on the mandatory rate in lump sum, inclusive of the EE and ER counterparts. Said lump sum amount shall be considered a single remittance for the applicable month as of the payment date;

2.) Monthly Income

Has a gross monthly income not exceeding Seventeen Thousand Five Hundred Pesos (P17,500). Gross monthly income is herein defined as basic monthly compensation and cost of living allowance;

3.) Age

Not more than sixty-five (65) years old at the date of application and not more than seventy (70) years old at maturity;

4.) Legal Capacity

Has the legal capacity to acquire and encumber real property;

5.) Financial Capability

Has passed satisfactory background/credit and employment/business checks of Pag-IBIG Fund;

6.) If with existing Pag-IBIG housing account, either as principal buyer / borrower or CO-buyer/ co-borrower, it must be updated;

7.) Has no outstanding Pag-IBIG Short Term Loan (STL) in arrears at the time of application. A member whose STL is in arrears shall be required to update his account; and

8.) Had no Pag-IBIG housing account that was foreclosed, cancelled, bought back due to default, or subjected to dacion en pago, which shall include cases where the borrower is no longer interested to pursue his housing account and surrenders the property.

However, the Fund’s Deputy Chief Executive Officer – Home Lending Operations Cluster may allow such borrower to apply for a new Pag-IBIG housing loan under certain meritorious conditions such as in the following cases:

  • Illness of the borrower or any of his immediate family members as certified by a government doctor together with the abstract or findings of the attending physician, if different from the certifying government doctor. The illness under consideration must be that which required the borrower to incur substantial expenses or a prolonged treatment of such illness which caused him/her to fail in his/her obligation with the Fund and eventually resulted in the foreclosure of his Real Estate Mortgage (REM) account, cancellation of the DCS or Contract-to-Sell (CTS), or surrender of his/her property via dacion en paqo,
  • Unemployment of the borrower at the time his previous housing account was foreclosed, its DCS/CTS cancelled or the property surrendered through dacion en pago, but the said borrower has now become employed and is able to meet all other eligibility criteria;
  • The subject property has been expropriated by the Government; or
  • Other similar meritorious cases that the Deputy Chief Executive Officer – Home Lending Operations Cluster may consider.

A qualified Pag-IBIG member may apply for a housing loan of up to Seven Hundred and Fifty Thousand Pesos (P750,OOO.OO),which shall be based on the lowest of the following:

  • the member’s desired loan amount and loanable amount based on gross monthly income,
  • capacity to pay and;
  • the loan-to-appraised value ratio.

Please note that those earning more than P17,500 are not under this Circular for Affordable Housing Program.  It is covered under Circular 310 for the End User Financing Program which I will be discussing also on my next blogs.

I hope that you learn something from this blog and thank you for reading.

 

 

Hi, I’m Ralf Roger Tagao, CPA, Real Estate Broker & Entrepreneur. I’m engaged in Real Estate Selling of house and lot particularly located in Bulacan.