Getting a condo is a significant life decision, especially in terms of your financial situation and capabilities. Whether you are excited to finally have a place on your own or just looking to own property under your name, it’s essential to be financially ready before applying for a mortgage.
If you’re a first-time buyer or simply want to broaden your knowledge of what to do before purchasing, this article will share the financial checks you should make before buying a condo.
8 Financial Checks to Consider Before Buying a Condo
Here’s what to know before buying a condo regarding financial preparedness.
1. Identify your sources of income
Upon deciding to buy a condo, you must assess your income and expenses. Examine your cash flow and figure out how much you can allocate to monthly mortgage payments. Ideally, spending more than 30% of your gross monthly income paying off housing is not advisable.
Whether you are working full-time or part-time, know if the income from your job is steady and consistent or if there may be months when you don’t earn anything. Adjust your finances accordingly if you foresee financial road bumps ahead. Otherwise, you’ll be “house poor”—you live in a great place but can’t afford to pay other essential utilities.
2. Check your savings
Saving up for a down payment helps establish your readiness to purchase a condo and is necessary to qualify for a mortgage. Keep in mind that a bigger down payment means you’ll own more of your new condo initially. It can make expensive condos affordable and lessen the burden of your monthly amortization.
3. Lessen your expenses
A practical way to save money for a condo is trimming down on expenses, identifying what is essential from what is not. Perhaps, with internet bills packaged with a telephone, you can opt to do away with the telephone connection to lower your expenses. Examine your costs and analyze what you can eliminate or cut down on in your budget.
Consider living a more modest lifestyle and cut any unnecessary luxury. You can save a substantial amount by opting to cook rather than dining out or ordering from delivery services. You’ll be surprised to see the amount you can save or allocate to your condo-buying once you learn to manage your finances and do expense cuts.
4. Practice a new budget
Establish a new budget and practice living on it. Spend and save like you already have to consider the additional costs of owning a condo, including paying utility bills and mortgage. Living within the confines of this new budget allows you to prepare and assess your capabilities once monthly mortgage payments and other bills roll in.
5. Assess if you are financially fluid
If you’re seeking a loan to purchase your condo, know that lenders look at your capability to pay the loan back, your income’s stability, and how much you can invest to cover down payment, taxes, closing costs, and other expenses. Achieving financial fluidity will increase your chances of getting a loan to allocate towards buying a condo.
6. Review your credit score and report
Assess your credit score and credit report six months to a year before buying a condo. It’s essential to “clean up” your credit report before applying for a mortgage. You may start by securing a copy of your credit report and credit score. Higher credit scores will allow you to qualify for lower mortgage rates.
In the Philippines, while there is no unified credit scoring system, there is the Credit Information Corporation (CIC) which is a government agency that stores your credit report including your scores, etc.
7. Document your income
Upon reviewing your credit score and applying for a loan, lenders will verify your income. You’ll need to present all the reported income on your tax returns in a loan application. It’s essential not to write off every possible tax deduction that highlights you have zero income.
Lenders will also verify income continuity and contact your employer to confirm you have a steady job. If your job pays on a commission basis, leading to your income fluctuating, you may have to hold down that job for an extended period. The “two-year rule“ for job history and credit will assist a borrower in showcasing steady income and good credit.
8. Monitor the market
Over the next 12 months, in preparation to buy a condo, pay attention to the place or area where it is. Monitoring the condo-buying market can give you insights into the prices to expect when you start shopping.
Being independent and owning a condo is a goal many strive to achieve. However, while it’s nice to think about purchasing your condo, there are several factors you need to consider before making this life-changing decision. Consider these financial checks to guide you in your condo-buying.
If you’re looking to buy your first or next condo, consider a condo for sale in Cebu. In that case, Mandani Bay should be your primary choice due to the luxurious condo-living and exceptional lifestyle it offers. For further inquiries about our properties, visit Mandani Bay’s official website.