PH Mortgages: Magic Numbers You Need to Know When Applying for One

Taking a step toward homeownership requires a lot of consideration. Apart from shopping around for properties for sale, you should also pay attention to the intangibles to make the best decisions.

For starters, keep these numbers in mind when planning to buy a house:

5 Years of Stay

You should only consider purchasing a property if you have no plans of moving at least in the next five years. Any Lancaster New City review would say that it wouldn’t make financial sense to take a housing loan if you’re going to relocate after a short period.

Even if you manage to re-sell the property quickly, any increase in its value might not be significant enough to offset the interest you would have paid over the years. If there’s a great chance that you would move to another location in the near future, consider renting instead of buying.

3 Years of Clean Credit History

Lenders can only judge your loan application based on your credit history in the past three years. This means any bad financial decisions you’ve made before that should have no bearing on your application.

In case of denial, the law requires your prospective lender to explain what’s wrong with your credit history so you would know how to fix it moving forward. Thanks to this three-year rule, you can improve your credit score fast to qualify for a housing loan in no time.

20% Down Payment

Most housing loans could only cover 80% of the property’s total selling price. This means you have to pay for the remainder upfront. Of course, you might be able to negotiate for a larger margin of financing if you have excellent credentials.

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28% Debt-to-Income Ratio

Most mortgage lenders would only let you borrow money equivalent to 28% of your gross monthly income at most. If you don’t qualify because of your current earnings, you should save up to increase the down payment you can give.

This should essentially reduce the loanable amount you need to buy the property you want.

Buying a house is a serious commitment with possible, long-term consequences. Always do the math to avoid making horrible mistakes. Home ownership may be the dream, but poor judgment on your part can put your family in a bad financial situation for many years.