Top 10 key considerations when borrowing money to buy a home

You might not know this, but having a complete and high-quality set of documents can determine up to 90% of the time and process required to handle your home loan application. So, what should you prepare in order to get a quick response from the bank? It’s simple: just ensure you have three key document categories ready: personal legal documents, documents proving the purpose of the loan, and proof of income documentation. At the same time, be proactive in asking the bank staff for help if you encounter any challenges while preparing your documents. They will provide you with the most specific and accurate instructions to make sure your loan application is fully complete.

One reality is that the bank’s promotional offers are often tied to certain conditions. Therefore, you should plan ahead for the possibility of paying off the loan early or breaking the contract. As such, it's important to understand the early repayment fees and whether you’ll need to return the promotional benefits the bank has provided. Typically, when taking out a home loan, around 80% of customers tend to pay off their debt within the first five years, and this often leads to early repayment penalties. Many borrowers overlook this and face significant fees of 1-3% on the amount repaid early. When banks offer low interest rates, they often include high penalties to offset the initial preferential rate. If you can find a loan agreement that doesn’t impose early repayment penalties, you can save a substantial amount. Pay attention to this detail.

Don’t passively wait for your loan to be approved and disbursed—stay in touch with the bank to avoid the risk of missing payment deadlines or losing any deposits made for your home purchase. Staying connected with the bank is also a great way to build trust and a strong relationship, making future transactions easier. This is an important tip to ensure that your loan agreement is as complete as possible, even after the contract is concluded.

Currently, the real estate market offers two types of apartment projects: those under construction and those with residents already living in them. For each type, there are different methods to survey prices. If you are considering buying an apartment where people already live, you can check prices by researching on reliable forums or websites. If you're still uncertain, consider visiting the apartment complex and asking the local residents or any acquaintances you may have in the area. This will provide you with more essential information.

For those looking to purchase an apartment in an ongoing construction project, it is important to take some time to explore reputable real estate websites. Key details to gather include: the project's size, the developer, the bank backing the project, types of apartments, and any customer promotions or offers... to make an informed decision.

Before deciding to purchase a home, ensure you have saved at least 30% of the property's value. Ideally, this savings should amount to 50% of the home's value. According to Rever's consultants, borrowing 50% of the property's value is considered an ideal loan-to-value ratio, offering the least financial pressure. This allows borrowers to easily repay the bank loan while also managing other daily expenses.

If the loan exceeds 50% of the property's value, borrowers may face significant challenges, as the constant pressure of debt repayment could become overwhelming.

Before signing a loan agreement or an investment contract with the developer, it's essential to carefully review each item in the contract. If needed, seek legal advice to ensure full understanding of all terms.

To avoid falling into the trap of floating interest rates, borrowers should estimate the possibility that the interest rate might rise by up to 30% and also plan for any unexpected expenses. After accounting for monthly household expenses, the remaining amount should cover at least 150% of the monthly repayment to the bank. For example, if your monthly repayment is 10 million VND, you should ensure you have an extra 15 million VND each month in case interest rates increase unexpectedly.

This is an essential step for those purchasing properties in projects that are still under construction, helping to minimize asset-related risks. Request the developer to provide legal documents related to the project and cross-check this information with the Department of Construction, the Department of Urban Planning and Architecture, and the Department of Natural Resources and Environment. It's also important to research details about the project and the developer's capabilities to ensure the project is completed on time.

There have been cases where real estate projects have failed, leaving customers who made deposits stranded. These projects were halted due to unauthorized construction, and the developers went into hiding, making it difficult for customers to recover their deposit.

After evaluating your financial capacity and external sources of support, you should aim to borrow no more than 70-80% of the value of the apartment you wish to buy, depending on the bank. Typically, banks will approve loans up to 70% of the property value if you use the apartment as collateral, or up to 90% if you use other real estate as collateral. If you have savings of 30-50% of the property's value combined with a stable monthly income, you can confidently proceed with the bank loan to soon own your dream home.

Generally, if your income is documented (such as through a contract, bank statement, or payment receipts), it will meet the bank's requirements. Alongside maintaining a stable income to support your ability to repay both principal and interest, you should also explore additional income sources to ensure that, even if interest rates rise, you can still manage to repay both the principal and interest. Furthermore, the loan term is also crucial. Depending on your income, loan amount, and investment purpose, you should select an appropriate loan term. If your income is low, consider choosing a longer loan term to reduce the monthly principal repayment, thus minimizing the pressure of paying off the loan.

Currently, home loan programs often focus on interest rates combined with gifts and discounts for customers. With a long-term loan like buying a home, don't just focus on the numbers; no bank offers interest-free loans. It’s important to consider the real interest rate throughout the loan period (including both promotional and post-promotion rates). Always remember the rule: the loan principal is fixed, but interest rates are often subject to change by the bank.

Many banks today offer attractive promotional interest rates of 7.5% - 8% per year, but only for the first 6 - 12 months. After the 13th month, interest rates are adjusted, increasing by % - 4%, depending on the bank. Therefore, before taking a home loan, you should carefully review how interest rates will change over the following years in the credit agreement (post-promotion rates) so you can better plan your repayment schedule. Additionally, make sure to check for any additional fees associated with the loan agreement. Many banks advertise low interest rates but have very high fees. Consider everything carefully before signing the agreement.

Self-assess your repayment ability:

• Financial capacity (1): this refers to your current savings and monthly income after deducting all living expenses.
• Supportive financial capacity (2): a portion of the funding provided by family members, with either an interest-free loan or a loan with an interest rate lower than or equal to that of the bank.
• Repayment ability (3): this is a non-negotiable requirement after signing a loan contract, which is the obligation to repay the loan. Therefore, it is crucial for the borrower to know their monthly repayment amount and understand how interest rates may fluctuate. Additionally, keep unexpected expenses to a minimum. However, to avoid defaulting on payments, buyers should consider borrowing no more than 20-30% of the property value.

Experts suggest that if the calculation of (1) + (2) results in (1) + (2) ≥ (3), then purchasing a condo with a loan can be considered feasible.