Bank Housing Loans in the Philippines: A Comprehensive Guide

Buying one's dream house and lot in the Philippines can be considered a luxury already. However, just because residential properties can be really pricey doesn't mean Filipino citizens with modest income sources couldn't buy a home of their own. This is where availing of housing loans comes into the equation.

There are top three financing options that aspiring homeowners can consider choosing from. These are in-house financing through real estate developers, Pag-IBIG housing loan, and bank financing Philippines through reputable banks. But here, we'll zero in on bank housing loans, what the eligibility and documentary requirements are, and how you can get your home loan application pre-approved.

Main Factors to Consider Before Getting a Home Loan

Before submitting the documentary requirements for your housing loan application, it's important to make an assessment of your current financial circumstances. As such, the following are the primary factors you should first consider before submitting your application.

Monthly amortization

The amount of the set monthly payment will let you know how much you should allocate for it on top of your other equally important financial obligations. To help you calculate your monthly payments corresponding to your chosen house model, its listing price, and total down payment, you can use a Home Loan Calculator, which you can access through our Lumina website.

Down payment amount

The higher the down payment you can provide, the higher the chance you can get pre-approved. What is more, you can choose a payment term that will take you fewer years to fully pay your loan obligations, which also means you save money from interest rates.

Loan tenor

Banks offer a payment term of up to 20 years. Pag-IBIG, on the other hand, offers payment terms of up to 30 years. The former can be a more preferable option if you want to save money from interest rates and more years of having to pay for a property you purchased three decades ago.

Interest rates

Finally, you have the option to choose between a fixed interest rate or a variable interest rate. The latter is ideal if you want to avail of potentially lower interest rates, while the former, considered the conventional housing loan, saves you from the risk of unpredictable market conditions and gives you the convenience that comes from knowing exactly how much you need to allot for your monthly payments.

Best Practices When Applying for a Housing Loan in the Philippines

After factoring in your potential monthly payments, loan tenure, and interest rates, it's time to strategize on how you can get the best deal and have the certainty that your housing loan application will be approved for the loan amount you requested. These best practices are as follows:

Decide on the exact loan purpose

Choosing bank financing does not automatically mean a residential house and lot purchase. It could also be a major home renovation, home construction on a piece of land you own, or refinancing an existing housing loan to settle any outstanding loan balance. In essence, be clear about what the exact purpose of your housing loan is.

Save as much money as you can

You need funding from a lending institution to get your dream home. However, that doesn't mean you are free from preliminary payments. Before applying and after your successful application, see to it that you are saving enough money for the monthly payments, down payment, property taxes, and other associated fees.

Make sure your borrowing history is clean

Your credit history will be scrutinized by banks to let them know whether you have been a responsible borrower from your past loans. Do you have a current loan that is due in a few months? Make sure to not miss any payment deadlines. This will help you build a good credit score and guarantee approval of your application.

Compare housing loan offers from different banks

Do not just focus on one particular banking institution. Shop around and compare offers and prices. After this, make an informed decision about which financial institution is offering the best deal that can help you attain your dream home in a less stressful housing loan process.

Consider consulting a real estate professional

When in doubt, a certified real estate professional can assist you in your investment inquiries and buying journey. This property expert can be a real estate agent or a broker.

Who Can Apply for a Housing Loan in the Philippines?

There is a general guideline as to who can apply for a home loan in the Philippines. An application alone does not guarantee approval, but it pays to know who is qualified to apply and not waste time securing a ton of paperwork if you later find out you actually don't meet the eligibility criteria.

Without further ado, here are the basic requirements to apply for bank financing housing loans in the Philippines:

• Applicant must be at least 21 years of age or 65 years old upon loan maturity

• Applicant must be a bona fide resident of the Philippines or a foreign national

• If applicant is an Overseas Filipino Worker (OFW), a POEA-approved certificate of employment must be secured together with a special power of attorney

• If applicant is a foreigner, he or she must meet all VISA requirements and must provide an Alien Certificate of Registration

How are Home Loan Applicants Approved or Rejected?

Applicants get approved (or rejected) based on the following set of eligibility criteria:

Age. As mentioned, the minimum age requirement is 21 years old, while the maximum age requirement can be determined by the criterion that the applicant must not be more than 65 years old upon the maturity of the loan. With that said, a 46-year-old borrower may be rejected for a housing loan with a 20-year payment term, since he or she will be 66 years old when the loan matures.

Borrower's income. As the principal borrower, you have to prove your repayment capabilities by providing the financial institution with pertinent documents that will corroborate your continuous employment status. Your gross monthly income will be factored in whether you qualify for the loan amount you applied for.

Spouse's income. If you are applying for a loan conjugally, your spouse's income will also be assessed. This will help you get approved for your housing loan as your spouse's income will serve as an addition to your income as the principal borrower.

Number of dependents. Sure, you have an above-average monthly income. But if you have multiple dependents, this means you also have multiple expenses that may weaken your financial health. For example, you have three children with one already in college, and the other two in high school and elementary, respectively. This results in a reduced disposable income, making your supposedly "above-average" income to become average.

Borrowing history. Have you been responsible from your past loans? If you previously applied for, say a personal or salary loan, have you not had any missed payments? Housing loan borrowers who have a history of responsible repayments are more likely to get approved. Meanwhile, irresponsible borrowers may have low credit scores and are likely to get rejected.

If you are more than 21 years of age with a stable and sufficient source of income and a high credit score, then you can almost guarantee that your home loan will be approved, and that your dream home is now within reach!

But your property doesn't have to be too expensive. You can still achieve quality and convenience in an affordable house and lot for sale, such as what Lumina Homes offers aspiring property owners like you from across the country.

Lumina Homes is the modest housing segment of Vista Land. For more than 10 years, we have maintained a history of providing quality yet affordable house and lot provisions for thousands of Filipino families. We are strategically present in Luzon, Visayas, and Mindanao from over 50 key developments. Feel free to send us your investment inquiries via our website and we'll be more than delighted to assist!