8 Things Every First-Time Homebuyer in the Philippines Should Know

Buying a home for the first time can feel daunting and exciting altogether. Balancing these emotions — and staying cool under pressure — is key to coming out of the process a happy first-time homeowner.

Looking at houses and condos for sale in the Philippines? Here are eight things you should know about the homebuying process.

1. There’s a lot of variety in the housing market

The best type of home for you will depend on your lifestyle considerations and budget. In the Philippine housing market, you’ll find a fair amount of options at your disposal such as:

House and lot types

• Single-attached. This housing type shares a common wall with an adjacent house. Townhouses are a good example of this.
• Single-detached. Single-detached houses are standalone structures that don’t have shared walls.
• Bungalow. A bungalow is a type of single-story home with all the rooms on the ground floor. 
• Duplex. Two residential units that share a common wall and roof.
• Multi-story. As the name implies, this type of house has two or more floors. 

Condo unit types

• Studio. Studio type units have one room which serves both as a bedroom and living room.
• Loft. Notable for its high ceiling, loft units have an elevated open bedroom overlooking the living area. 
• Bedroom. Bedroom condo units have separate bedrooms which usually range from one to three. 
• Bi-level. Bi-level units are divided into two levels, similar to a two-story house, with enclosed bedrooms on the second level.
• Penthouse. Typically the most expensive unit in any development, penthouse units are located on the topmost floor. They’re usually split into two or more levels. 

If you’re debating whether you should go for a house and lot or a condominium, check out our blog post on the pros and cons of a house vs condo.

2. Don’t waive the home inspection contingency

Your future home shouldn’t have any structural issues and other undisclosed defects. These problems are essentially hidden costs and often lead to expensive repairs later on. By exercising your right to a home inspection, can spot potential issues like:

• Cracks on the walls, ceilings, and floor
• Uneven floors in some or all rooms
• Low water pressure
• Clogged/leaking pipes that lead to water damage
• Faulty wiring and broken electrical fittings
• Signs of pest infestation
• Damage to the septic system
• Cracks in the home exterior, rotting trim, or damaged roof

Make it a point to inspect the home in-person. If possible, hire a PRC-registered broker/agent so you have a trained professional helping to spot any underlying problems. If you can’t find an agent, try to at least be accompanied by a second pair of eyes.

3. The PAG-IBIG Fund is an accessible home loan option

The Home Development Mutual Fund or the Pag-IBIG Fund, is a government-owned agency that offers affordable home financing to its members. It’s an accessible home loan option option for mainly two reasons:

• It has some of the lowest interest rates in the Philippine real estate market.
• It offers a maximum payment term of 30 years.

To avail of the loan, you must be a PAG-IBIG member with at least 24 monthly contributions. Alternatively, you also have the option to make a lump sum payment equivalent to the total amount of 24 contributions. Note that while you’ll be allowed to apply for a home loan after that, PAG-IBIG will only count the lump sum payment as one monthly contribution. 

Additionally, there are a few caveats to consider if you’re thinking of getting a PAG-IBIG loan. One, there’s a maximum loan amount of ₱6 million. If you’re looking at properties that are worth more than that, you’ll need to seek other means of financing. 

Two, the interest rate you’ll need to pay will change, depending on the repricing period you choose (1-year to 30-year fixed periods are available). So there’s a chance that you could be paying a higher or lower rate midway through the loan term, based on prevailing market conditions.  

Check out the PAG-IBIG Fund website for more information.

4. A better feel of a neighborhood informs your buying decision

It’s also important to see whether a neighborhood fits into your lifestyle and personal preferences. Aside from the presence of hospitals, schools, and transportation options, you should also assess the following:

• Natural disaster risk. Does the neighborhood have a history of flooding? Landslides? Is it near a fault line? 
• Security. What’s the neighborhood like, especially at night? Are there any CCTV cameras? Are there police stations nearby? Do security guards or barangay tanods regularly patrol the area?
• Internet service. Which internet service providers have the best service in this area?
• Available amenities. Are there appropriate amenities that meet your family’s needs? This can include children’s playgrounds, basketball courts, gyms, and swimming pools.
• Homeowners association (HOA) fees. Are the HOA fees reasonable, considering the services and amenities you get in return? What community policies are being implemented? 

Take a walk or drive around the neighborhood yourself to see how things are like on the ground. Plus, talk to your potential neighbors. Not only will you get a better idea of what it’s like living next to them, but they’re also a rich source of information about the neighborhood. 

Additionally, check out local Facebook groups for the community in question. See if there are public communities where HOA members are present.

5. Timing is key to buying real estate

The right timing to buy a home will depend on your specific real estate goals. So before you go out there and make serious offers, consider the following:

• Consider buying between January and May, if you want to have several home options to choose from. The combination of good weather and the conclusion of tax season mid-April will encourage more buyers to see what the market has to offer. On the flip side, real estate prices are usually higher around this period.
• Consider buying during the “BER” months, if you want less competition and potentially better prices.  During this time, a good chunk of buyers are likely to be preoccupied with holiday preparations (and gift spending). Additionally, some real estate agents are hurrying to meet quotas, which can further strengthen your negotiation position. One downside though is that there are usually less property choices during this time of the year.

6. A strong position prior to negotiating is crucial

Even before you start negotiating for favorable terms, you should be actively putting yourself in a strong position. Market research, due diligence, and financial preparedness can help you achieve that, specifically:

• Find out why the property is being sold, how long has it been on the market, and how many other homes are for sale in the area. If the seller is in a hurry to let go of the property, find out why. The same is true if the property has been in the market for some time, and if there are many other properties in the market.
• Request repairs if the home inspection reveals major issues, especially if they are deal breakers for you. If you’re planning on doing the repairs yourself, try negotiating a lower purchase price to compensate for the cost of repairs. You can also ask for other concessions such as a fresh paint job or getting particular furnishings for free. 
• Make yourself stand out by showing financial preparedness by making a down payment and/or getting pre-approved for a home loan. A pre-approval outlines the possible interest rates and loan amounts you’ll qualify for. It also comes with a conditional commitment in writing for an exact loan amount, giving sellers a better assurance that you can afford their asking price.

Learn more negotiation tips from our previous blog post: how to negotiate as a homebuyer.

7. Closing costs should be included in your budget

Don’t forget to take into account closing costs in your overall homebuying budget. These costs are a blend of service fees and taxes that need to be paid to legally conclude a real estate transaction in the Philippines. These include:

• Local transfer tax. The exact amount, payable to the city or municipal treasurer’s office, depends on the local government unit (varies from 0.50% to 0.75% of the selling price). Usually paid by the buyer. 
• Registration fee. A fee paid to the local Registry of Deeds to register the purchased property under your name. The amount is approximately 1% of the property’s gross selling price. Usually paid by the buyer
• Notarial fees. Usually paid by the buyer to notarize the Deed of Absolute Sale. The amount is around 1–2% of the property’s selling price but not lower than ₱1,000.
• Value-added tax (VAT). A 12% tax on the sale of real property classified as an ordinary asset. VAT amount is usually paid by the buyer.
• Documentary stamp tax. This is a tax on key documents that record the sale of a property, payable to the Bureau of Internal Revenue (BIR). The amount is 1.5% of the property’s fair market value, selling price, or zonal value, whichever is higher. Typically paid by the seller. 
• Capital gains tax. A tax on the sale of real property classified as a capital asset. This amount, paid by the seller to the BIR, is 6% of the property’s gross selling price or fair market value, whichever is higher.

8. Foreigners can buy homes in the Philippines, albeit with some limitations

The general rule is that foreigners aren’t allowed to own land, but they are permitted ownership rights to the standing structures. If you’re a foreigner looking to make property investments in the Philippines, there are several pathways you can explore, such as:

• Leasing land long-term, a period that can run up to 50 years.
• Owning a condo, as long as foreign ownership of a building doesn’t exceed 40% of total units, in compliance with the Condominium Act. 
• Ownership through marriage to a Filipino citizen, whose name will be officially recorded in the land title.
• Ownership through a corporation, as long as the latter’s equity is 60% Filipino and 40% foreign.

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