Feb 09, 2022

10 Questions for the First-Time Homebuyer: A Guide

Making a huge investment such as buying real estate property (like your first house) is a big feat that requires thorough consideration, commitment, and responsibility. It is important to factor in your needs, financial capability, and other life circumstances that are essential in narrowing down your options.

There are a lot of other things to consider when buying your first real estate property in the Philippines. In this article, we will discuss the most important questions that most first-time homebuyers should ask.

Real Estate Property Questions a First-Time Homebuyer Should Ask

1. Can I afford it?

When you start seriously considering buying a house for the first time, you should make sure that you are financially ready since it is a commitment that you need to sustain for a long time.  

As you scout for the property, you should also keep in mind your net disposable income (NDI), which is your monthly income minus the taxes. That determines your initial financial capability. Additionally, more than the taxes, you should also consider other expenses such as necessities, utility bills, and other household needs.  

Ideally, it is best to find a real estate property deal that is within your means. It is also advisable not to max out your net disposable income with monthly payments so that you can allot some of it to your savings and emergency funds.  

2. Can I ask for a discount on real estate property?

Discounts are normally given to buyers who make straight cash payments. You may ask your agent for recurring discounts and freebies as the availability of these things vary depending on the developers and their terms and conditions.

There may be instances when certain additional discounts are given for a limited time only, but they depend on the developers’ discretion, so it is best to ask them directly.  

3. Do I need to pay the down payment or equity immediately?

Most real estate developers only start the construction phase of your house once you have fully paid the down payment, usually 10% of the total contract price.

Installments on the down payment may be offered depending on the developer or agent and normally span 15 to 24 months. But if you have cash or savings that you can use to pay the down payment in full, it is advisable to do so because developers usually offer further discounts and special payment terms for the principal amount depending on the season or property.

4. What are the most important documents I need to prepare?

A long list of requirements may be needed and these may vary depending on the type of employment of the home buyer. In general, these are some of the most common documents you need to prepare when buying real estate property:

  • Birth certificate
  • Marriage certificate (if applicable)
  • 2 x 2 ID pictures
  • Two valid identification cards (preferably government-issued ID cards bearing your photo and signature)
  • Residence certificate
  • Proof of billing address
  • Postdated checks for equity
  • Photocopy of latest income tax return
  • Other BIR forms as may be required
  • Original and notarized certificate of employment and compensation
  • Pay slips for the last three months
  • Bank statement for the last three months

5. What is the purpose of a reservation fee for real estate property?

Most of the time you will be asked for a reservation fee, which is a nonrefundable payment to guarantee that for a certain amount of time, the property you wish to purchase will not be sold to anyone else while you are still in the process of completing your documents and settling other matters. Reservation fees are also deductible from the down payment or the total contract price.  

6. What will it cost me in terms of real property tax?

Real property tax is a kind of tax imposed by the local government on properties to be paid by the property owners. It is based on the value of buildings and lands and may be calculated using the formula below:  
 
(Note that the real property tax rate in Metro Manila is 2% while it is 1% outside Metro Manila.) 
 
RPT = RPT Rate x Assessed Value  

To compute the real property tax to be paid, multiply the real property tax rate with the assessed value.  

Assessment value, on the other hand, is a property’s taxable value, which can be obtained by multiplying the market value of a property by its assessment level. Assessment levels are prescribed by Section 218 of the Local Government Code and may vary depending on a property’s area and usage.  

On Lands 

On Buildings (Residential) 

Real estate assessment levels -buildings or residential property

Sample computation: 

A residential property located in Quezon City under the name of Mr. Juan Dela Cruz has a market value of Php12,000,000. The land is valued at Php8,000,000 while the building or the house itself is valued at Php4,000,000.  

To find out the real property tax that needs to be paid, start by computing the total assessed value and referring to the tables above.  

Php8,000,000 (market value of land) x 20% (assessment level: residential) = Php1,600,000 

Php4,000,000 (market value of the building: residential) x 40% (assessment level) = Php1,600,000 

Php1,600,000 + Php1,600,00 = Php3,200,000 (Total Assessed Value)  

Now to compute the real property tax to be paid by Mr. Juan Dela Cruz: 

RPT = RPT Rate x Total Assessed Value  

RPT = 2% x Php3,200,000 

RPT = Php64,000  

Another 1% or Special Education Fund (SEF) is added to the total computed assessed value that goes to fund the needs of public schools within a city or municipality as stated in RA No. 5447. 

Total Assessed Value x 1% (SEF) = Php32,000  

Therefore, Php64,000 + Php32,000 = Php96,000 is the total tax to be paid by Mr. Juan Dela Cruz.  

7. What type of mortgage should I get for my real estate property?

There are four common mortgages in the Philippines: bank financing, in-house financing, Pag-IBIG, and SSS. These give you various options on payment terms.  

Bank Financing 

Bank financing is the most common type of mortgage in the Philippines because of its low interest rates of 4.99% to 8% per annum depending on the bank. However, banks are stricter compared with other home financing options and may require a lot of paperwork and background checks.  

When choosing this mortgage option, it is best to ensure your eligibility by proving your financial capacity through a stable income, a job, and/or an operating and profitable business.  

The usual maximum loanable amount for banks is up to 80% of the total appraised value of the real estate property. There are some instances where it can be as much as 90% depending on your credit score and capacity to pay. 

In-House Financing 

In-house financing, on the other hand, is a more lenient type of mortgage that is usually offered by developers and agents. In this type of mortgage, the developers offer a staggered payment scheme with certain terms and conditions that fit the financial capacity of the buyer.  

Compared with bank financing, in-house financing offers an application process that is easier since it does not require a lot of paperwork. However, the downsides are being subjected to higher interest rates of up to 18% per annum and having shorter loan terms, depending on the developer. 

Pag-IBIG 

The Home Development Mutual Fund, or what most people refer to as the Pag-IBIG Fund, is a government-run corporation that aims to help employed Filipinos purchase a home through affordable housing financing schemes.  

Under certain conditions, a member is allowed to borrow a maximum amount of Php6 million or up to 80% of a property’s selling price depending on the member’s monthly contributions. The interest rates are also higher than banks at 5.75% to 9.87% per annum. 

If you are a member and you wish to apply for a loan, you must meet the following eligibility requirements:  

  • Must be an active member with at least 24 months of contributions  
  • Must have the legal capacity to acquire a real estate property in the Philippines 
  • Must be not over 60 years old upon application and not more than 70 years old upon maturity of loan  
  • Must not have any Pag-IBIG housing loan that is cancelled or voluntarily surrendered 

If you are eligible, here is a list of the requirements and documents that you need to prepare:  

  • Housing loan application 
  • Vicinity map of property  
  • Proof of income  
  • Tax declaration and tax receipt  
  • Valid IDs 
  • Certified true copy of title  
  • Additional requirement depending on purpose of loan  

For those who are not earning as much but also wish to acquire a property of their own, Pag-IBIG also offers an Affordable Housing Loan for minimum-wage and low-income earners.  

Under this loan program, a member should have a monthly income of Php15,000 within the National Capital Region (NCR) and Php12,000 if outside NCR. The maximum loanable amount is Php750,000 but may still depend on the member’s capacity to pay, the actual amount needed, and the loan-to-appraise value ratio. Interest rates are also lower at 3% to 6.5% per annum.  

SSS 

Meanwhile, the Philippine Social Security System (SSS) offers housing loans for non-government employees. It caters to Overseas Filipino Workers (OFWs) who wish to purchase or construct their home in the Philippines. It has slightly higher interest rates of 8% to 11% per annum.  

If you are a member and you wish to apply for a loan, you must meet the following eligibility requirements: 

  • Must be a certified Overseas Filipino Worker  
  • Must be a voluntary OFW member of SSS 
  • Must have at least 36 months of contribution, with 24 months of continuous contribution prior to the application  
  • Must not be more than 60 years old at the time of application and must be insurable. A maximum loan term of 5 years will be given to members aged 60 years old at the time of application.  
  • Must not be previously granted an SSS housing loan  
  • Must not have been granted with final SSS benefits 

There are also two types of loans a member can avail of: Socialized Housing and Low-Cost Housing.  

For Socialized Housing, the maximum loanable amount is up to Php450,000 while the maximum loanable amount for Low-Cost Housing is Php2,000,000. This may still vary depending on the capacity to pay of the member and the actual amount needed after evaluation by the SSS.  

Here’s an overview of the four types of mortgage available to Filipinos: 

8. Will the house have good resale value?

When that time comes when you must leave or need a change of environment, having a house that has a high resale value becomes an asset. Most people tend to focus solely on what would fit their needs in the present and fail to consider other factors that would affect the value of the real estate property in the future.  

Some of the usual indicators that determine the resale value of a property are location and neighborhood, house plan and layout, storage space, the current condition of the house, specific features, and current market value.  

Neighborhood 

Houses that are in a safe and secure neighborhood are easier to sell and usually have a higher resale value because safety is one of the most crucial factors every homebuyer considers. No one wants to live in a neighborhood where you cannot sleep soundly at night because of security concerns. You should also assess if future developments may arise within the area because these developments affect the appreciation value of real estate property.  

House Plan and Layout  

Your house may look good, but is it functionally and strategically planned? Often, people are swayed by good exterior design without even considering if the overall layout is planned properly according to their needs. It is best to consult your broker or a professional to assess the house you are buying.  

Enough Storage and Space for Future Expansions  

Filipinos are maximalist in nature. We tend to hoard things we really do not need, thinking that these will still be valuable in the future. That is why it is important to consider houses with enough storage spaces for things and future expansions. This is one way of future-proofing in case a family grows big, where currently empty rooms and spaces can be converted into functional ones.  

Current Condition of the House 

For pre-owned houses, one important thing to know is the house’s repair history. Ask your broker or agent how many times the house had undergone repairs, and if there are underlying problems that need to be addressed. These things are crucial because it will save you all the hassle when you live in the house and in the future when you decide to sell it . However, if a house is brand new, there will be no problems with its condition, just some natural deterioration over time, which is likely to happen to any house. 

Special Features  

Uniqueness automatically makes a house’s value higher. Pools, spruced-up landscaping, high ceilings, automated lighting, and energy-efficient features are some common examples. If you have the means to invest in houses with these features, it is best to do so because people nowadays are always looking for something new. These features will add to the house’s value in no time, making your property stand out. 

Current Market Value  

Current market value is the price a property will sell in an open market. To come up with the value, real estate appraisers compare the prices of real estate property sold within the neighborhood with relatively the same size, features, and characteristics. With those given conditions, it is important to invest in property located in high-value or developing areas so you can sell it right away when the need arises.  

Considering these factors before buying would help you sell the property with ease in the future and even get a good return on your investment.  

9. How good is the location of the real estate property?

When buying a house, one should not just consider the beauty of the house and its surroundings but also its accessibility, proximity to major establishments, security, neighborhood, and geographical location.  

Needs may vary from person to person, but a suitable location is crucial since your life will be spent within it in the foreseeable years. You may ask your broker or agent to schedule an ocular visit to check the properties you are eyeing so you can have a better assessment of the vicinity.  

Accessibility 

Most people prefer to buy houses on the outskirts of major cities since these are less expensive compared with houses located within the city and near the central business districts. But in the long-term, it is far more convenient to live near your workplace or your children’s schools. Aside from gas or public transportation expenses, you will also save a lot of travel time. You may also check different road maps to see if the vicinity has enough right-of-way, especially those that are in suburban areas.  

Proximity to major establishments and leisure facilities  

Another factor to consider when buying a house is its proximity to major essential establishments such as markets, groceries, pharmacies, and banks, and leisure facilities like parks and gyms. Aside from the convenience, living in neighborhoods with easy access to various amenities gives people more social connections and a sense of belonging. It is also a plus if your chosen location is near fire stations, police stations, and hospitals for added security during emergency situations.  

Neighborhood and security  

Living in a place where you can sleep peacefully at night should be non-negotiable. When buying a house, it is best to consider a neighborhood where you feel like you belong and most importantly feel at peace. During an ocular visit, you may want to check if there are CCTVs installed within the vicinity for extra protection and security personnel that roam around to ensure everyone’s safety.  

Geographical location 

You also need to find out if the location of the real estate property is prone to flooding or landslides, near an active fault line, or susceptible to any other natural disasters that may be life-threatening. One should not compromise their safety especially when these natural occurrences are starting to be more frequent and disastrous because of climate change.  

You may request a Comprehensive Land Use Plan (CLUP), which is available via the city or municipality’s planning department. You may also check the National Mapping and Resource Information Agency’s (NAMRIA) website for public domain of downloadable hazard maps that you may use as reference in considering various locations. 

Moving into your real estate property

10. When can I move in?

Move-in dates differ depending on the contract terms. Some would let you move in immediately once you close the deal after you pay the down payment in full, while others would depend on your home loan approval or once the finishing, furnishings, and punch listings are done, which usually take a few weeks or so.  

If you are still having second thoughts about buying a home for the first time and making a life-changing investment, ask yourself these questions again and make sure that all points are considered. This will help you avoid recurring problems that may arise in the future.  

You may also visit Enta PH to see a wide array of options that would suit your needs. With thousands of real estate property listings across the country, Enta will help you find something that is perfect for you. 

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