Buying A House On A Solo Income
I’m Single and I wanted to buy a house.
We have come to a time when a lot of young adults are postponing marriage, the number of Filipinos buying a house on a single income is real and increasing. According to the mortgage software firm Ellie Mae, as many as 47% of Millennial home buyers last year were unmarried.[Source] Yes and majority of my clients are.
Buying a House on a Single Income Is Possible, Yes because I did it and my clients did it too.
Single (Civil Status) loan applicants will rely on to his/her own capacity to pay, own credit records and own documents to secure loan approval. Since everything will depend on you get your loan approved may be quite meticulous.
How will I know if I am ready to buy the house that I am eyeing for?
Here are the things that you need to prepare or should care about;
You will know that you are qualified for that house or condo that you’ve been eyeing for if you can set aside at least 30-40% of your monthly income without paralyzing your savings and basic needs.
Why such percentage? Because financing institutions will look into that percentage of your income untouchable making you capable to pay for the loan amortization.
If 30-40% of your monthly income is not enough for the monthly amortization you may want to consider a co-owner (co-borrower). Which means he/she will own 50% share of your house and may also pay for the houses if you will be unable to pay [Yes, co-owners name will be in the title too].
YOUR CREDIT STANDING.
Unlike the United States of America or other foreign countries, Filipinos are not that mindful with their credit scores. We are not even aware of it or won’t even care to know more about it that much, not until you wanted to get a loan or most likely housing loans. If you have credit cards, checks, loans from COOP and other credit institutions it is all listed in one database (yup). If you have those in the past and are quite delinquent about it, it is time for you to fix that up.
My Story: I used to have several credit cards (HSBC, CITIBANK, EASTWEST BANK) and loans (CHINATRUST) from several banking institutions when I was still working as a call center team lead in Cebu (2005). 2 of the cards are not in good standing, because it has been used by someone else to purchase and laptop and did not pay for it all in 2009. I thought it was all settled in 2010 before I terminated the cards, because that’s what was promised. To my surprise in 2016 while I was working for my housing loan documents, I found out that I do have an outstanding credit with CITIBANK that reached up to 120,000 thousand pesos in total the reason why I cannot apply for a checking account in any banking institutions. I called CITIBANK and was offered to pay for 30,000 pesos to settle the account. Paid the account in cash in a set due date to consider it done. I also requested for a clearance from the bank stating that I no longer have liabilities to the bank. Yup, lesson learned the hard way!
As a Filipino, it is mandatory that we apply membership to PAG-IBIG FUND. This is a government institution that has a housing program for Filipinos to take advantage. The housing program by PAGIBIG FUND gives us an opportunity to own a house and pay it in a longer time with the lowest annual interest possible. Check your contributions most especially those that were paid or in automatic deductions from your company. Make sure everything is well accounted for and up to date. Also, make sure that your contributions are consolidated in your account so you won’t have problems in your loan applications later. PAG-IBIG FUND requires at least 24 months contribution to qualify for the housing loan. You may also choose to pay it one time to complete the qualification. If you don’t have a PAG-IBIG FUND MEMBERSHIP yet Apply here.
YOUR LIFE INSURANCE.
Yup, you read it right. If you don’t have a life insurance yet, financing institutions will require you to get one (Or sell you one lol). No, this is not the insurance for your house, this an insurance coverage for you, the borrower. The group life insurance issued by your company is also too small (in PH setting) to take care of you should there be accidents or illness that may lead you to inability to work or worst death. It is highly recommended that you get a life insurance with accident/ disability/ critical illness coverage. That way you’ll get help pay your bills should you experience an illness or accident.
A specialized product known as mortgage protection life insurance can also help take care of your mortgage payments if you become unable to work. It’s only intended to help with home loan payments (some policies are a big more flexible), so it’s not a comprehensive financial solution. Still, because it typically has a looser underwriting process, it’s an option for those with riskier jobs or poor health, who consequently have trouble finding affordable disability coverage. [Source]
Financial status and financial background is a big deal. How well you played and planned for your finances while you are young and single matters big time. Most especially if you are planning to take up a loan to buy a house.
SINGLE and self-employed? or a FREELANCER? Read this >>> How to Score a Housing Loan if You Are Self-employed or an Online Worker?