Know the factors to consider when choosing the right financing option. Choosing the right financing option when purchasing a home is a crucial decision you should not take lightly. The decision-making process should involve a comprehensive review of your current cash flow, your financial goals, debts, investments and any other elements of your financial life. Here’s a compact guide to help you navigate this important step in your home-buying journey.

Factor 1: Your Income Stability

Get a sense of your monthly income and cash flow — what’s coming in and what’s going out. You must understand that your present financial standing will be the basis of your capability to get a home loan. As a general rule, your monthly home loan should not exceed 40% of your gross income/salary monthly so the rest goes to your savings, daily cashflow and contingencies.

If you have a steady income and this 20-80 rule is doable for you, your next step is to prepare your equity, get loan computations and compare the lowest interest rate possible for a term you’re comfortable with. Equity in banks usually ranges from 20% to 30% of total selling price.

If you are a longtime member of PAG-IBIG with no outstanding loan and you have a stable employment tenure, you have the edge to qualify for a PAG-IBIG Housing Loan. Apart from the lowest interest rates, PAG-IBIG also offers lower equity requirement compared to banks.

For the minimum wage earner who doubts the possibility of owning a home, there is no reason to be discouraged. You can explore PAG-IBIG Fund’s Affordable Housing Loan which allows you to avail of a home loan for as low as P2,500 per month for a 30-year term.

Factor 2: Your Long-term Goals

Creating a roadmap for your financial future is important if you’re planning to get a home loan. If you are employed yet have plans of opening up a business, shifting to a new profession or working overseas in the near future, you must be prepared to “transition-proof” your plans. One surefire way to do this is to find a loan scheme with manageable monthly payments and the longest fixed-rate period so you still have full control over your cash flow until you’ve settled financially after a transition.

Business owners or self-employed professionals with irregular income, on the other hand, should be more prudent when choosing the right housing loan scheme and terms. If possible, the best route is to pay a fairly larger down payment so you can easily qualify and at the same time, lower your loan amount. You also need to look at flexibility in terms of loan repayment. This will enable you to pay off a loan faster once funds are available so you can focus more on growing your business. Plus, a good loan payment history in a bank will also be good for your credit standing and even open opportunities for you and your business.

Factor 3: Your Target Property

The type of house you intend to loan also plays a big factor when choosing the right financing. If you’re looking at low-cost homes or properties in secondary cities with prices not higher than six million, a PAG-IBIG Housing Loan will definitely be your best option. PAG-IBIG has hundreds of housing projects nationwide including accredited projects and developers so you’ll surely have plenty of options.

In-house and bank financing, on the other hand, are viable options for relatively higher value properties within urban centers and metro cities. Banks also partner with developers and offer reasonable payment terms and interest rates.

Factor 4: Your Retirement Plans

Thinking of retirement can add a big pressure when you’re paying off a mortgage. Among all the financing options, PAG-IBIG offers the longest term which is up to 30 years. So if you’re a young professional with a long career ahead of you, PAG-IBIG is definitely worth pursuing. Ultimately, your plans for retirement should coincide with your loan term. Be a forward-thinker and assess all the possible ways you can pay a loan faster. After all, you don’t want to be living and working just to pay off a housing loan.

Are you currently looking for a potential first property purchase? Head over to OnePropertee and check out some of the top properties that match your budget using the Income Filter. Happy home hunting!