First, find out the selling prices of the comparable houses for sale in your area. You can go to scheduled open houses if you have a developer in mind. You can also go online if you want to check the available properties from the same developer or other properties from other developers.
This will give you a general idea on how the local housing industry is thriving including the current selling prices of houses you can expect yourself to pay.
Consider the following example.
Selling price in ₱ - ₱1,000,000.00
Down payment in % - 10%
Max loan terms in yrs. - 25 years
Interest rate in % - 11%
Based on the above data, the down payment amount will be ₱100,000 and the payable loan amount is ₱900,000. The gross monthly income will be ₱8,200++ which means you should be earning at least ₱22,000 gross per month to avail a home loan. That’s the simplest explanation.
Third, check the additional fees required. The above amount (₱100,000 down payment) is only the upfront payment. Other costs are involved such as value-added tax (12%) and closing costs. Check if VAT is already included in the actual selling price or not because that is another ₱120,000 for you to shoulder.
The closing costs include transfer tax, documentary stamp tax and title registration fee. Transfer tax is paid to the municipality or city where the property is located. Rates vary per city or municipality although it is between 0.5 and 0.75% of the selling price (₱5,000 to ₱7,500) or the fair market value or zonal value whichever is higher.
Documentary stamp is defined by the BIR (Bureau of Internal Revenue) as a “tax on documents evidencing the sale or transfer of a right or property.” The payable amount is also whichever is higher among 1.5% of the selling price (₱150,000), fair market value and zonal value.
Title registration fee is paid for the issuance of the title bearing your name as the new owner. The registration fee depends on a graduated table of fees.
Closing costs are paid 30 days after giving your first deposit. However, there are also developers that require the payment of closing costs upon completion of the sale, that is, after transferring the property to your name.
You have to determine REALISTICALLY how a house fits into your current monthly budget. The rule of thumb is spending no more than 28% on housing costs alone. So, if you are earning ₱22,000, you can only afford a monthly amortization of ₱6,200. That is for amortization alone.
What about other household expenses - utility bills, food, etc.? Not to mention, monthly upkeep and major repairs in the future wherein you should be saving at least 1% of your monthly salary for emergencies. These should be included in the 28%.
So, what it should be – READY or NOT YET? Not because you cannot buy your dream house now, it doesn’t mean you should give up on it. It is called a dream house for a reason. Be wiser with your money now so you can buy your dream house later.