Scouting for some Philippines properties recently? Lucky for you if you can buy your dream house on a cash basis. If not, you need to go through a long process dealing with Pag-IBIG or a bank. Here are some of the most important things – the basics – when trying to get a housing loan.
1) Income requirement
Yes, there is an income requirement. This can be the single most important factor in securing a mortgage loan. Lenders mostly assess a borrower based on his or her capacity to pay. Generally, your monthly amortization must not exceed 40% of your monthly gross income.
2) Documentary requirement
You need to proofs of identity and income. For the latter, you will need an income tax return (ITR) more so if you are self-employed. If you are an employee, you will need a copy of latest pay slips and employment contract or certificate. Other valid documents may be required from you especially if you have multiple sources of income to prove how much you are actually earning.
3) Age requirement
In the Philippines, only individuals of legal age are entitled to get a home loan. The maximum term for a housing loan will depend on your age at the time of loan application. For most lending institutions, the mortgage must be completed before the borrower reaches the age 65. As such, you cannot avail a 20-year housing loan if your age now is 50 years old (that makes you 70 years old at the time of loan maturity). Nevertheless, you can avail a 10 to 15-year home loan.
4) Processing fee
Processing fee, while they vary from bank to bank, is paid in cash. Commonly, the processing fee is about 2.5% of the total borrowed amount.
5) Appraisal fee
For non-accredited developers that you are trying to avail the property from, an appraisal fee must be paid. The bank determines the appraisal fee that is often more or less Php3,000. If the housing loan is approved, the bank does not usually charge the borrower of the appraisal fee. If disapproved, the bank will collect a fee.
As such, it would be very convenient for you if you will just obtain a property from a bank’s accredited developer. You can choose the property first before asking your bank if the developer is accredited to them or not. Or, you can go directly to your bank and ask for options of developers before going house hunting. In this way, you can save yourself the appraisal fee. You can also obtain higher loanable amount.
The second option is considered the ideal route. It simplifies the search process because after getting bank approval first, you would know what price range of properties to look for.
6) Letter of Guaranty (LOG)
While waiting for the actual payout, the bank may issue an LOG that you can use as a ‘pass.’ Some developers accept it especially the accredited ones while some don’t. With an LOG, you can use the house already even if only 5% of the contract price is paid.
7) Interest rate
Interest rates for housing loans are usually fixed. However, they are only fixed for a certain period. You are actually the one who is going to decide that period. For instance, the bank will ask you to choose the number of years that the in
terest rate will be fixed. That is, if you choose the first 5 years, you need to pay the same amount of interest rate for the first 5 years only.
The interest rate will be recalculated after the 5th year to reflect the current economic condition.
Availing a housing loan is a complicated process, but you can always make it easier by educating yourself with the basics. Well, at least you know the basics.