C's of Credit for Housing Buyers

Are you now planning for your first housing investment? Well, this topic is very important for home buyers to think of for some moment. Here are some situations I would like to share:

1. One client availed a house and applied it in bank financing. She has twice the salary required by banks to avail a bank loan for the property. Since, technically over qualified based on income, I expected faster processing of bank application. Before making reservation, I ask the client some questions during pre- qualification process and I was informed that her credit card history has already been cleared. For the bank loan application, aside from income documents, clearance from credit companies were also required and the client had complied but unfortunately, the application was denied. It actually took some time to get update from that bank maybe because of many housing applications for this current economy, so we decided to transfer the client's application to another bank. Same with previous bank, there were more questions regarding employment and the credit history. It took sometime also to get the real score of my client in that application but with open communication and constant follow up, the client was pre-approved but to a certain requirement - an additional down payment which turns out to be more beneficial for client because they will have a lower monthly payment.

2. Another client availed property, an investor. The client informed me of his existing housing loan but he assures me that the existing property can be paid in full before the due date the last month of down payment for the new property. He planned to apply it in bank financing. There should be no problem because he also has 2 times the salary required. He's actually excited about this investment and made the reservation before going abroad with his regular job. After 12 months of down payment, the client was not able to payout the existing housing loan and his investment with us has switched to in-house financing. The client told me that he had expected it so he is very willing even for in-house financing.

3. Another client from abroad called me and inquired regarding a house. She can make a Spot Down Payment for the property and so ask me for help to have unit. The client can even pay a double of the required down payment but unfortunately, with regards to financing we are not sure if she would qualify. She has no regular job abroad though earning from her part time jobs. Financing is the only way she can afford- either by bank or Pag-IBIG, unfortunately she's not a member of Pag-IBIG and there is no way I can pursue her reservation after looking at all the possibilities. I've lost a reservation but I've saved their down payment - a hard earned money.

4. Another client is a mother of an OFW. The mother of an OFW told me that they can pay a spot downpayment. As we discussed the process and pre-qualification, I later found out that the income is not qualified for bank financing at preferred loanable amount . I tried offering another unit of a different type with a lesser lot area to fit the requirement but they are eager for the unit. However I explained it, they are expecting to be approved by with such income because they are friends with a bank manager who told them they are qualified for a house financing in bank. Anyway, every bank has its own process and a mere say of a friend could not give assurance of loan approval, because all banks first consideration is income.

5. There also was a client of a fellow seller. He is a businessman who availed a property and made a Spot Down Payment. The next process is the application of loan at bank financing. After all the requirements and credit check, the loan application was denied because of bouncing checks. The last I heard, they transferred the loan to other banks with hope for consideration.

Above situations really help in dealing with my next clients and this topic also help next home buyers. Now, here are the C's of Credit which aims to discuss some points above in dealing or aiming of home financing in banks.
C's of Credit for Home Buyers

Capacity

Is the applicant qualified based on income requirement? The very first consideration is the monthly or annual salary breakdown based on the Certificate of Employment or Job Contract for OFW. For businesses, the financial statement or the vouchers, income flows and Income Tax Returns and other Income documents would be required. These documents shows how capable the applicant is to pay a certain loan.The employment tenure is also a consideration of conservative banks, thus, sometimes delayed approval.

Character

A personal attitude of an applicant after personal briefing or secondary background check. Personally having follow ups to your contact in banks would give a positive impression and would make the process faster. Some applications took sometime to be approved because principal/buyer are not having direct follow ups, or through representative who is not also eager that may slow the process because of incomplete documents or no coordination at all.

Condition

Economic condition is a factor for banks to be conservative in their loan approval. In times of good economic condition, people have more money and jobs to be qualified for loans, along with property boom it creates a Buyers Market. With this economy, everything is overflowing - many properties and buyers and low interest rates - though it doesn't mean easy approval of loans for every client because an overflowing of housing applications also means a more options for banks to whom their funds be awarded.

Collateral

Collateral in the form of the property or object of the Loan is the secondary repayment source of banks in case of forfeitures.Banks put more favor with developers that are established in a property development for faster processing of loans and transfer of property documents. A reason why some banks are not accredited for some developer because of trust issue or others, and with this said, clients are better off to avail home financing at banks who are accredited by developers. Good property development has a higher appraisal value for banks that would be beneficial for property buyers or beneficial to banks incase or foreclosures.

Credit Score: Car Loans, Credit Cards, Bouncing Checks and Existing Housing Loan

This may show the payment attitude of the principal in dealing with their commitments. Existing credit is a major reason an applicant may be approved or denied by their home financing. By observation, if it's a first time housing application with credit cards, car loans or any credit would give a negative first impressions to bank, unless clients had established a good relationship with the bank or had found in good credit standing after all.


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About the Author

Jerome Morada

Realtor & Webmaster

Good day! I'm Jerome, your friendly Real Estate Broker with PRC License 0012399 and HLURB registration. Just sharing simple tips, please share if you find it useful! Thanks!

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