Home Buying Guide for Start-up Families

Most of the time, it is more tempting to just continue to rent. It will be a tough decision resolve  to buy a house  because there will be a lot of sacrifices and expenses that we’ll be facing. When you buy a house, you’ll be entering in a big legal and financial commitment. 

Nowadays, buying a real estate is like marriage, although you can get rid of your spouse, if it’s really a wrong decision to marry him/her, it will not be easy to do.  It cannot be done in a snap of a finger without incurring a big loss. A flawed decision could cost you several pains and hundreds of sleepless nights. Imagine yourself struggling just to raise money for the monthly amortization which can last for about 5 years or even 20-30 years! There is a very little room for error in  buying a home.

Therefore it is best that we take into consideration the process that should happen from the time that we decide to buy a home until the time we actually have the home.

1. Type of home that will suit your needs 

You have to determine what type of home suits your needs. You’ll be choosing from several options: a traditional single-family home, a townhouse, a condo, or a multi-family building with two to four units. They have their own advantages and disadvantages. Does a condo lifestyle suits you and your family? Is buying a townhouse the right choice for you and your kids?  Think about it. You have to be satisfied with its features, fixtures and location. You should always consider your neighborhood size all the way up to the living room design and room layout.

2. Setting the price range

 It is important that, before you proceed in choosing a home, you have to get an idea of how much a lender will be willing to give you in order for you to purchase the property. You may visit banks and lending institution and inquire for a home loan amount and interest you can qualify for.  Banks and other lending institutions will apply certain criteria to determine how much loan you can have considering your monthly income, the debt that you have and your job stability.  The terms, interest and fees varies. It is good to compare them side by side to really see which one could be of best advantage for you.  It is good to get a pre-approval for an amount you can loan and the interest so you’ll have an idea of the price range of home you can afford.

3. Home Shopping

You need to do a lot of research before buying a home. You should build a comparison of its kind, level, location-wise and affordability.  Say for example, you’re working in Makati and you can afford to buy a 5-6 million Philippine peso home. From that point of view, you can probably look at a mid-end condominium in Makati, a two bedroom townhouse in Quezon City or a Single detached house and lot in a subdivision somewhere in the South suburbs of Makati.

Compare each type and kind of home based on location. Do not forget to think through your goals and needs.  (See my blog: Location is major considerationin buying a home).

4. Due Diligence

Due diligence involves among others checking  the  authenticity of the Title and  its transfer history. You should verify the lot measurements, building conformity, worthiness, and permits. You should also be aware of the taxes paid, authority of the sellers and so on and forth depending  on the situation, before making your offer.

If you are buying a condominium from  developers like Ayala , SMDC  or DMCI who are really reputable , maybe not as much- but it is still an abosolute must that you do  a Due Diligence on the property.  Always bear in mind the saying  in the law  CAVEAT EMPTOR!  or “ buyers beware”. It is best that you are assisted by a reputable and  Professional  licensed real estate broker for a more reliable decision-making and approach.

5. Home Appraisal

This is an important step if you are buying from a private individual ,before you make an offer. It will give you  not only an idea of the price  but also the factors affecting the price of the property.  It can be a basis to evaluate if the property will have a good appreciation in the future.

6. Negotiation and Closing

If  you will reach this stage,  it means that all terms are correct and fair. In this case, you are truly decided and strong-minded that you can afford the house. The house meets your needs and goals. You can also rely and depend on the documents and situation of the property. Without having these in mind, there is no use to go through this stage.

Negotiation means you and the seller just have to fine tune , meet halfway about certain things like price, documentation, mode of payment  or few  other concerns. Considering that you have done all the process closing should be a breeze. It should just involve signing of documents with all agreed  terms and conditions in  it and implementing payment  procedure .

Photo Credit: ATI Properties

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Rent-to-own Scheme: A Go or a No?

"If you want to achieve more in  life, you should be assertive and be persistent for  everything you need or want."

 Let me share with you a story of my sister in law in California;

 "I really wanted to have a house but i do not have a bank credit yet back then.  So i tried to  negotiate  with the owners of the houses I like  if they could let me have it through rent to own scheme, I was turned down several times  but i persisted  until i  met this  old couple who agreed on a rent-to-own basis. After 5 years, I was able to build up a bank credit  and was able to build enough equity not only to fully  bank  finance the balance,   i even had extra to remodel the house."

My sister-in-law never fall short in sharing with me her story. Sounds good right?

Here in the Philippines, we can also do arrangements like that. However, most of us are unaware  rent-to-own scheme when it comes to acquiring a home.

Want to know how it works? Read it for yourself and spread the word.

According to my own understanding, a rent-to-own concept is an arrangement between the Lessee and the Lessor where in the Lessee will have an option to buy the property after a certain period of time, and you can actually negotiate this arrangement with an owner who has property for lease or sale. Well... there is no harm in trying.

Let me give you an example.

There’s a condominium for Lease in Makati and it’s open to a rent-to-own arrangement. Instead of a regular rental contract, they have this so-called “Contract of Lease with Option to buy” document. There will be a non-refundable fee which is termed as “option consideration”. If the price of that condominium in Makati is 3 Million, then the “option fee” for that condominium in Makati will be around P150, 000 to P300, 000. You can also settle this payment through deducting it in your down payment if you decide to buy the property in the long run.

There are also terms and conditions that will be agreed upon by and between the Lessee and the Lessor. Other terms might still be negotiable depending on the buyer and the seller.

Let us take a look on the advantages of staying in a rent-to-own scheme.

1. Instant equity

Experience the feeling of having an instant  home without immediately drawing out a million peso from your account. You can also have the ability to lock in a purchase price, in case home prices increase the next few years.

2. No immediate bank involvement

Admit it, it really takes time to save and shell out cash for a one-time bigtime payment. In this deal, you will be given enough time to build your credits depending on the agreed monthly payment. It will not be costly compared to a single full payment for a certain property. You will actually save a percentage from your rental payment and part of it will be credited to your down payment.

3. Hassle-free process

If in case you’ll be interested to agree on a rent-to-own scheme, it will be easier for you to dress it up as the house is  ready to be occupied. You will get used to a place with your new friends and neighbors without making a huge purchase. Aside from having time to build up a down payment and good credit record, renters have the advantage of "trying out" the house.

However, there are also pitfalls in rent-to-own scheme. At the end of the day, if you don’t buy the home, you will lose your "option to buy consderation payment". There are also rent-to-own scams so make sure the agreement is reviewed very well.  It is also not aguarantee that prices will go up, although here in the Philippines properties have steadily gone up.  Last but not the least, there might be problems on the property that you don’t know  so better do a due diligence even before entering into a rent-to-own scheme.

Anyhow, we can always try to consult professionals for further review and assistance.

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