Not all newlyweds come home to a place they can call their OWN.
Same is true with me and my husband. After being married for almost 9 months now, we know that the clock is ticking! Meaning, we should take a giant leap towards sealing a deal that will lead us to our OWN HOME.
Even before tying the knot, we were already discussing this BIG PLAN, among our family, especially with my father, who is a Real Estate Broker.
Growing up, I had witnessed how scrutinizing property buyers could be. What my father thought as closed deals, most often turned otherwise due to last minute change of minds. But my father said its okay, adding that investing hard-earned money must be planned and thought of several times.
So, when our turn to look for a property came, he told us the same thing, “No rush please.”
At this point of our marriage, he already had provided us list of properties that we can choose from. Patience is indeed a virtue as we had learned a bunch of lessons in buying a house for the first time. Here are some of them:
Find properties online and make a shortlist
It pays to follow the 100-10-3-1 rule. It means that homebuyers should create a shortlist of 100 properties which can be found online. Afterwards, narrow it down to 3 properties, and send letters of intent to the owners of the selected properties.
In the end, buy the best property that meets all your requirements.
“Hanap lang nang hanap (Just continue looking),” my father told us. He reminds us that looking at more properties will leave us with the best choice.
I would always hear him asking his clients to discuss among family members the property that they REALLY WANT and NEED, explaining that it is not enough that they just want a property, they should also need it.
Location, plans of living or working overseas and price range are among the factors he deemed important in choosing which property to buy.
He adds that first time home buyers should also choose a particular type of residential property: should it be a single-detached or a mid-rise or a high-rise condominium unit?
Buy within your means
The rule in shopping for a new house is the same as shopping for dresses, gadgets and many other things—do not overspend.
“Do not buy a property that will leave you with financial woes,” he told us.
He adds that our first home is not necessarily our permanent residence, and so we should not be pressured to get the best property, especially if we can’t afford it at the moment.
Monthly amortizations and banks/lending institutions’ guidelines are important considerations, according to him.
He reminds: “The maximum monthly amortization that you should pay is 40% of your net income.”
Make yourself pre-approved for a loan so you can determine your budget. He said it is practical to choose the longest term possible, paying the maximum your combined income can afford at the lowest fixed rate which also enables you to save on the interest.
Inspect the property thoroughly
Age, condition, safety and security, vicinity and neighborhood of the property should be included in a property inspection checklist of any first time homebuyer.
It should cover all exterior (roof, gutters, walls, foundations, etc.) and interior (general, living room, dining room, kitchen, bedroom, etc.) It will also help to bring a foreman in order to identify necessary repairs and improvements.
One more important consideration: Make sure that the property you plan to buy is not a flood-prone area or an earthquake-prone area.
Legal matters are of equal importance. Secure the certified true copy of the Transfer Certificate of Title or Condominium Certificate of Title (TCT/CCT) and ensure that the tax declaration was already transferred.
Other things to check: Clearance ensuring that the property has no amount outstanding and no illegal occupants.
Secure a life insurance and mortgage redemption insurance
To protect your family, make sure that your property is insured and covered by a life insurance and/or mortgage redemption insurance (MRI). An MRI is insurance upon the life of a mortgagor providing for payment of any unpaid balance of the mortgage loan at the insured’s death.
There are arguments, however, that obtaining traditional life insurance over MRI is better because the former maintains its face value throughout the lifetime of the policy, whereas the latter promises to pay out an amount equal to the client’s outstanding mortgage debt at any point in time, which is inherently a decreasing sum. Thus, it is said that MRI is extremely profitable for lenders and/or insurers and equally as disadvantageous to borrowers.
Find the most affordable property
“Be patient. You will soon find a property that you can buy low and sell high,” my father told us.
Though you are primarily looking for a property for your own use, you can make it as well an investment that you can profit from.
Just recently, my father showed us a property near our family’s residence; it is rather old and requires major overhaul. We asked him, why should we buy it? He told us that it’s a very cheap property, considering its big land area, adding that people who have a vast knowledge in real estate will consider buying the property because of its good location.
Learning important statistics in real estate is a big asset of any homebuyer. Here are basic calculations you need to perform when buying a home:
- Focus on investment returns and make comparisons. The normal marked up rates are from 10% to 20%, make sure you are aware of this to avoid buying an overpriced property.
- Make negotiations to arrive at the best price possible.
- Another factor that you need to compute for is the Return on Investment (ROI). Returns can be created through rental income and property appreciation.
Renting over buying
Another option that my father gave us is to rent than buy a property, considering the high interest rate in buying a property.
He instructed us to buy an income-generating asset first and have it rented to cover the amortization and monthly interest rates. Then, we can buy another property when we already have enough money.
Buy from banks
Buy from auctions, sealed bidding or negotiated sale through banks. He remarked that apart from the given fact that banks are reputable sellers, they can also finance our purchase and give us long payment terms with low interest rates.
Banks only need to recover their investment so they can lend money again.
Look for foreclosed and inherited properties
As a couple, we are looking for a property sold at a lower price. As per my father’s advice, we constantly search for either foreclosed properties or real estate assets that need to be liquidated immediately.
Owners of these kinds of properties are motivated to sell because they are either leaving the country or needing to pay for their sick relatives’ medical expenses. While some who inherited properties simply want to make money out of it because they don’t have enough knowledge about real estate. All of them can sell properties at a lower cost.
Transact only with reputable developers
In our quest to find a property that will meet our requirements, we came across a developer that is offering several properties. The first thing that we did was to google the developer’s name on the Internet and investigate if the company is legitimate and reputable.
Another important thing to check: Does the developer and/or its projects have the required license to sell from the Housing and Land Use Regulatory Board?
These are among the most important considerations in buying a house for the first time. With due diligence, I am sure, we are well on our way to moving into our dream home, or a home we can truly call our OWN.