Many Filipinos dream of owning their homes, but not everyone can pay for their houses in full from the get-go. Applying for a housing loan provides many Filipinos with the means to pursue their dream of having a place that they can call their own.
Housing loans are financial products that are designed not just for first-time homebuyers, but also for those who are looking for ways to improve their existing property. Here are some of the reasons why prospective and current homeowners are keen on getting a housing loan.
- To Purchase a Home. You may want to buy a condominium unit, a house and lot, or a piece of land. Purchasing this property can be the first step to building your dream home.
- To Refinance Your Loan. You already have an existing housing loan, but you found another financial product that offers better terms. Refinancing your housing loan means having your new creditor pay your old one, and then paying your loan to your new creditor under more favorable terms.
- To Use Your Home’s Equity. Perhaps you want to cover medical expenses, fund your children’s education, or travel extensively, and you’re willing to use your home to finance these projects. Getting approved for a home equity loan enables you to borrow money against your property’s value.
- To Construct a Home. You own a piece of land on which you can build a house. You’re applying for a housing loan to fund the construction and ensure the building’s completion. The loan can be used to pay for labor, materials, and permits.
- To Improve Your Home. You have an existing home that you want to update, and getting a housing loan can help finance this project. The loan can be used to fund home renovations, remodeling, and repairs.
If any of these situations apply to you, then a housing loan will provide you with the most practical means of funding your upcoming projects for your home.
Are You Eligible to Apply for a Housing Loan?
Once you’ve established that a housing loan will help you cover your financial needs for your property, you then need to determine if you can apply for one. These are the most basic requirements to be considered for a housing loan application.
- If you’re a Philippine resident, you need to be between 21 and 65 years old.
- If you’re an overseas Filipino worker (OFW), you must have a special power of attorney, a copy of your contract, and a certificate of employment. The last document must be approved by the Philippine Overseas Employment Administration (POEA).
- If you’re a foreigner living in the Philippines, you must have the necessary visa requirements as well as an Alien Certificate of Registration.
Depending on your financial services provider, you may also be required to submit other documents for your loan application.
What Are Your Options for Financing Your Housing Project?
There are public and private organizations that can help you find the funds you need to purchase or improve your property and make it more suited to your family’s lifestyle. Here are some of the most popular funding options that many would-be and present homeowners use in the Philippines.
Bank Financing
A private source of funding, banks offer consumers plenty of financial products that will enable them to buy, build, and upgrade their homes. In general, banks make use of a more rigorous and demanding process compared to other lenders. Borrowers who want to work with banks must be prepared to submit various documents and wait for the approval of their housing loan applications. The amount of money and the terms that banks can offer lenders may vary greatly. For example, Robinsons Bank can cover up to 90% of the contract price of the housing project if the customer is working with the bank’s accredited developers, and it can cover 80% if the customer wants to work with a non-accredited developer. There are also banks that offer 5- to 20-year period payment terms to their customers.
There are many housing loan products that are backed by reputable banks in the market today. To make the best choice, it’s especially important to have a keen understanding of what your needs are. This way, you can compare housing loan products properly and choose the best-matched package among your long list of options.
In-House Financing
Another private option, in-house financing is offered by real estate developers. More likely than not, this organization will require you to provide a 10% to 30% down payment, then you need to pay the balance within 5 years. Real estate developers can be lax with their initial requirements, and applying for a housing loan through these entities is far easier compared to dealing with other options. However, some of them may also offer higher-than-usual interest rates and other fees.
Given the quick and convenient nature of this financing channel, it’s become the go-to funding option among people who have cash on hand and those who want to expedite the process of purchasing their homes in full. If you want to own your home as soon as possible, or if you’ve saved a significant amount of money in your bank account specifically for buying your dream house, then this can be the best choice for you.
Pag-IBIG Housing Loan
The Pag-IBIG Fund is designed to make it easy for regular Filipinos to find financial assistance for purchasing and improving their homes. Members of the program can avail of loans amounting to up to 6 million pesos. The program offers its housing and other loan products to people who have been members of Pag-IBIG for at least 24 months, those who are no older than 65 years old, and members with no foreclosed, canceled, returned, or surrendered housing loans from the same organization.
If you’re a member of Pag-IBIG, it’s a good idea to look into how you can use your benefits to help finance your upcoming projects for your home. Many developers have coordinated with Pag-IBIG so that prospective homeowners can have access to more affordable and convenient options for their housing needs.
SSS Financing
The Social Security System (SSS), which serves as the government’s social insurance program, also offers home loans to OFWs. The organization can lend up to 2 million pesos to borrowers, an amount that may be paid for in full for 30 years maximum. If one of your family members is working abroad and they want to start building a modest home, this can be a convenient option.
What Factors Should You Consider When Choosing the Right Housing Loan Option?
There are many factors that one should consider when choosing the best type of housing loan. First, they need to know whether the lender is offering a loan product with a fixed interest or variable interest. Fixed interest loans retain the same interest rate over an agreed-upon period, regardless of the movement of the market. Going this route enables you to allot a specified budget for paying your loan. Variable interest loans, on the other hand, will have varied interest rates per month, so there’s a chance that you’ll pay a higher or lower amount than what you expected.
In addition to the interest rates, it’s also important to determine the fees and other expenses that you’ll have to pay on top of your housing loan. Then, you must also keep a close eye on the terms you agree to in case you fail to fulfill your part of the bargain.
How Will Your Loan Application Be Evaluated?
Not everyone who applies for a housing loan will receive approval from their financial services provider. Both public and private entities that offer housing loans aim to get their money back, and as such, they only approve housing loan applications from individuals who they deem to have the capability to settle their debts in full. They do this by using the documents submitted by the applicants and checking the following details:
- Credit History. First and foremost, public and private financial organizations will look at your credit history to determine if you have been able to fulfill your responsibilities as a borrower in the past. Looking at your credit card use or other financial transactions, they’ll decide whether or not you are likely to pay your loans in full and within the terms indicated in your contract.
- The age of the applicant determines the maximum number of years that they can pay for their loan. If you’ve reached 50 years of age, for example, then there’s a good chance that you will no longer be considered for 20-year housing loans as you’ll be 70 years old by the time the loan term is finished.
- Family Income. How much you earn plays a big part in whether or not your housing loan application will be approved. Your spouse’s income will also be considered if you will be jointly applying for the said loan. This detail enables financial organizations to determine whether an applicant can repay their debts.
- Income Stability. Financial institutions are more likely to approve the application of an individual or a couple that showcases better financial stability. So it’s a good idea to stick with a company for at least 2 years if you’re planning to take out a housing loan in the near future.
- Raising young children and supporting one’s aging parents are costly responsibilities, and financial organizations understand that having a lot of dependents may affect a person’s capacity to fulfill their financial obligations.
- Amount of Loan. The amount that a borrower should apply for should be well within the financial services provider’s acceptable range. The bigger the loan amount, the more the lender will scrutinize the borrower’s capability to pay the amount back in full.
If you’re thinking of finally putting down roots and having a space that you can call entirely your own, make sure to think through your options before finalizing your decision. Consider your current situation, determine exactly what you need from the financial product that you’ll use, and shop wisely for the right housing loan. This way, you can ensure that the process of purchasing your home will proceed as smoothly as possible.