Welcome to the start of your home-buying journey! Whether you’re buying your first condo in Quezon City or a starter house near the metro, this 4-part series will guide you—month by month—through every critical step.

In Months 1 to 3, we’ll lay the groundwork by focusing on your financial fitness. This phase covers three core milestones:

• Building your home buying budget
• Understanding loan options and pre-approval
• Avoiding common early missteps that cost time and money

But first, a quick story:

Back in 2019, one of my clients—a young couple with stable incomes—was excited to buy their first home. They had their dream condo picked out, but their loan application was denied. Why? They hadn’t calculated their debt-to-income ratio, and their existing car loan tipped the scales. That early misstep delayed their move by over a year.

The lesson? Financial clarity comes before property search.

Phase 1: Financial Planning for Homebuyers

Before falling in love with a listing on Facebook Marketplace, take a long, honest look at your finances. Also, do this before DM-ing your real estate broker.

1. Calculate Your Budget

How much can you afford?

Most lenders recommend that your monthly housing cost should not exceed 30% to 40% of your gross monthly income. This range allows room for savings, emergencies, and lifestyle flexibility.

Why this range?
A lower percentage offers better breathing room. This is ideal for single-income households or freelancers. A higher end will work if you’re confident about career growth or stable dual incomes.

Use this simple formula:

(Monthly Gross Income) × 0.30 to 0.40 = Ideal Monthly Amortization

Example: Let’s say your monthly income is P80,000:
30% = P24,000 → Ideal for conservative budgeting
40% = P32,000 → Max cap for most lenders

You can use this amortization to work backward toward your price range using this bank loan calculator.

2. Check Your Savings and Emergency Fund

You’ll need:

• 10–20% down payment of the property price
• 5–8% in closing costs (taxes, registration, transfer fees)
• A separate emergency fund (at least 3–6 months of living expenses)

Tip: Start saving in a separate account labeled “Dream Home Fund” to resist the urge to spend it.

3. Know Your Debt-to-Income Ratio

This ratio helps lenders evaluate your repayment capacity.

Ideal: Keep your DTI below 40%.

TIP: Reduce small debts first. Even trimming down credit card usage can improve your DTI within a month.

Formula:

(Monthly Debt Payments ÷ Gross Monthly Income) × 100 = DTI Ratio

Example:
Monthly car loan = P10,000
Monthly income = P80,000
DTI = (10,000 ÷ 80,000) × 100 = 12.5%
Ideal DTI: Below 40%

If your DTI is higher, consider paying down debt before applying for a loan.

Phase 2: Pre-Approval Process

Getting pre-approved early is one of the smartest moves you can make—it’s like getting a “shopping limit” from the bank.

Why Pre-Approval Is Important:

• Tells you your exact loanable amount
• Speeds up the buying process when you find the right home
• Makes your offer more credible to sellers

Employed	Self-Employed
Valid ID	Valid ID
Certificate of Employment (COE)	DTI/SEC Registration
Payslips (last 3 months)	Latest Income Tax Return (ITR)
Latest ITR or BIR 2316	Bank statements (6–12 months)
Proof of billing	Audited Financial Statements
TIN, SSS, Pag-IBIG ID	Proof of billing

Need a head start? Here’s a Pag-IBIG Housing Loan Checklist.

Phase 3: Compare Loan Options

Not all home loans are created equal. Each has pros and cons depending on your income, job type, and long-term goals.

Loan Type	Best For	Pros	Cons
Bank Financing	High-income earners	Faster process, flexible terms, lower rates	Need higher income or collateral
PAG-IBIG Housing	Employed/OFW with records	Lower rates, longer terms, smaller equity	Longer processing time
In-House Financing	Pre-selling buyers	Less paperwork, quicker approval	Higher interest, shorter payment terms

Pag-IBIG loan info here

Common Mistakes to Avoid

Knowing what not to do is just as valuable.

• Skipping the emergency fund – Leads to future loan stress or defaults
• Not checking your DTI early – Big reason why banks reject applications
• Applying for a loan before paying down debts – Weakens your creditworthiness
• Assuming pre-qualification = pre-approval – They’re not the same. Pre-approval requires docs and bank evaluation

Action Plan for Months 1 to 3

Let’s map out your financial fitness journey:

Week-by-Week Roadmap

Timeline	Task
Week 1–2	Assess income, debts, and calculate DTI
Week 3–4	Set budget, start down payment savings fund
Month 2	Research banks vs. PAG-IBIG loan options
Month 3	Prepare documents, apply for pre-approval

Pro Tip: Revisit your budget every quarter or if your income changes. It helps make sure you’re staying on track, especially after pre-approval.

Key Takeaways

• Know your financial capacity before contacting a broker
• Stay within the 30–40% income-to-amortization range
• Keep a strong DTI ratio (below 40%)
• Compare loan types and get pre-approved early
• Avoid early mistakes that can delay your homeownership goals

Your Ultimate Home Buying Checklist: Months 1–3

Ready to take the first serious step toward owning your dream home? This comprehensive checklist covers every crucial move—from setting your budget and understanding loan options to gathering the documents for pre-approval.

Use it as your personal guide. It will help you stay organized, confident, and on track during the first phase of your 12-month home buying journey.

Download it now and take control of your next move—one checklist at a time.

Next Up: Property Research and Site Visits (Months 4–6)

We’ll help you:

• Browse listings wisely
• Narrow down locations
• Maximize your time during tripping visits
• Understand what really matters in a home’s surroundings