Quick Guide in Getting a Housing Loan

What could have happened if we all had to wait to have enough money to buy a house and lot in outright cash? Most of us would not dare to dream of having a house and lot in the Philippines by waiting for retirement day. Viewed in that way, the best solution we had is getting our dream house and lot through the help of a housing loan.

A Quick Housing Loan Guide in the Philippines

Before you begin looking for a housing loan, a good start is figuring out how much you can afford. First, look at your household income. Combining your income with your spouse (if married) or with your parents (if single) and the result will be the number equivalent to your household income. Financing institutions approve housing loans when the monthly amortization for the loan does not exceed 30% of monthly household income.

Generally, housing loan applicants must have a steady source of income. Either as an employee for at least two years, self-employed, or a business owner. Financing institutions will ask you to provide documents to confirm your status.

Second, make sure to have your finances in order. Credit history also greatly affects your eligibility. Your credit history is a collated data from different sources like government agencies, banks, collection agencies, and credit cards that financing institutions would gather to check the stability of your income and inherent capacity to pay for the monthly payments.

Usually, you may pay outright cash, deferred payment, or choose three financing options in availing house and lot such as in-house financing (from developers), bank financing, and Pag-IBIG Financing known as Home Development Mutual Fund (HDMF). See what financing fits you.

When you have the monthly budget estimate, you may use Lumina Homes Loan Calculator. This site will help you determine your dream affordable house and lot and what model house, financing, and terms of payment you can comfortably afford.

Lastly, proceed to a home purchase. And now, buying house and lot is made easier through Lumina Homes Online Reservation. For assistance, you may consult a property consultant now!

If you are looking to know more and expand your knowledge on how housing loans work in the Philippines, read on for a comprehensive guide and other relevant topics in your future purchase of residential property in your desired location.

Top Five Purposes of Availing a Housing Loan

Only a few manage to pay for a house and lot in full cash right off the bat without relying on a housing loan from banks, developers, or government agencies. But for most Filipinos, the attainment of their dream house would be less financially daunting with the help of a housing loan.

Of course, a housing loan application is not limited to a property purchase. Let's tackle the top five purposes why people resort to a home loan for their financial needs.

1. Home Purchase

This is the most common and basic purpose of applying for a housing loan, be it through a bank, real estate providers, and government-backed financing institutions.

2. Home Construction

The availment of a home construction loan is for people who already have a lot but need further funding for expenses on, well, the construction of the house, such as materials, payment on permits, and compensation for laborers.

3. House Improvement

The purpose of applying for a home loan is not limited to the building of an entire house. It could be simply needing additional funds for improving an existing house and lot in the Philippines. House improvement could mean adding more rooms to your house or extending it.

4. Existing Housing Loan Refinancing

Homeowners opt for a housing loan refinancing if their current mortgage proves to be a little financially challenging. Refinancing will help lower interest rates and will give people the option to switch from a fixed rate to a variable rate and vice versa, depending on which will help ease their financial burden.

5. Home Equity Loan

Finally, a home equity loan is for people who need cash and hence borrow money with their home's current market value serving as collateral and, by extension, as security for the lenders that any outstanding loan balance will be paid for accordingly.

Who Can Avail and Qualify for a Housing Loan?

To qualify for a home loan to fund a residential house purchase or any other purpose for that matter, the following criteria must be met.

• The home loan applicant must be at least 21 years of age or 65 years old upon the loan maturity.

• The home loan applicant must be a resident of the Philippines.

• For Overseas Filipino Workers (OFWs), a special power of attorney ought to be secured and provided, plus a certificate of employment (COE) certified by the Philippine Overseas Employment Administration (POEA).

• For foreigners, they must comply with VISA requirements and submit their Alien Certificate of Registration.

Eligibility Evaluation for the Granting of Housing Loan

Needless to say, applying for housing loans entails requirements that must be met before the approval of a home loan request. These eligibility requirements all boil down to the following criteria.

Income

One of the most important criteria in securing a home loan is proof of income for the principal borrower. How much you earn regularly and how stable your job is are important factors for lenders in the granting or rejection of a loan application.

Age

The inclusion of this criteria is for the determination of the maximum length or years of your housing loan term. For example, banks require that applicants must not be above 65 years old at the loan's maturity date.

Spouse’s Income

Not a few loan applications are made conjugally. So if the housing loan application is being made with your spouse, his or her source of income will also be subjected to scrutiny to determine his or her financial capacity for continuous payment.

Dependents

If you have many dependents and your monthly salary is considered average, it could have an adverse impact on your home loan application. More people under one roof with parents earning just enough to shoulder daily expenses may run the risk of home loan disapproval for the straightforward reason of insufficient financial capacity. Hence, the number of dependents also serves as a factor to consider for lenders to evaluate your ability or inability to pay.

Stability

Continuous employment over the course of several years is one way to prove financial capacity to pay for a home loan, another important factor to establish eligibility. Typically, two years is the minimum required employment experience. For self-employed, freelancers, or business owners, supplemental information about your taxes, earnings, business permits, and any other relevant documents that you think could up your chances must be submitted.

Credit History

Finally, your creditworthiness will be judged based upon your history of past borrowing and how reliable you were when it comes to paying on time. This could come from different sources such as banks, credit cards, government agencies, and other money-lending providers. An excellent credit history also means establishing confidence that your income is enough to pay the bills regularly and diligently.

Main Types of Housing Loan Options

Aspiring property owners can choose from either of these two main types of housing loan options depending on their preference as well as the expert advice they may have gotten from a professional. These are conventional and flexible housing loan options.

Conventional

This housing loan type consists of fixed payment terms over a certain period of time. Opting for a conventional housing loan is ideal for those who prefer a set or predetermined payment scheme so as not to undergo the hassle of having to regularly make notes of different amounts paid per month. This is also best to have an organized payment setup.

Flexible

Most commonly offered by banking institutions, a flexible housing loan option gives borrowers the payment flexibility that comes from controlling the loan's interest rate in accordance with the amount that will be deposited. Principal repayments can also be done anytime.

Top 3 Housing Loan Options for Financing

There are three housing loan options for financing which principal borrowers can choose from. These could be through banks, in-house financing through real estate developers, or through the government-owned and controlled Pag-IBIG Fund.

1. Banks

Most banks in the Philippines help borrowers secure a home loan application. The loanable amount and payment terms are different from bank to bank. But typically, it ranges from 20 to 25 years. Banks also offer higher loanable amounts and lower interest rates compared to the next but highly preferred financing institution.

2. Pag-IBIG housing loan

Also known as Home Development Mutual Fund (HDMF), Pag-IBIG offers up to 30 years of payment terms for property buyers. Plus, the processing of requirements is significantly less stringent than it is when applied and processed through banking options.

3. In-House Financing

When housing loans requested through banks and Pag-IBIG fail, persistent property buyers resort to in-house financing, which is a type of home loan directly to a real estate developer such as Lumina Homes. This is still a viable option in securing a home loan when the top two options fail.

Common Reason for Denial of Home Loan Application

It goes without saying that not all home loan applications are automatically accepted. You can submit all the necessary documents and still find yourself encountering the heartbreak of rejection. Lenders can be really strict and would need more guarantee that monthly payments and other necessary financial obligations for the borrower will be met. But it all boils down to these pointers below.

• You failed to provide all the documents needed for pre-approval.
• Not meeting all the qualifications set in the lender's eligibility evaluation.
• The lender doubts your financial capacity to pay after considering all factors, such as insufficient monthly income, number of dependents, employment (in)stability, and bad credit history.

This could really be discouraging for the home loan applicant. But all things considered, you can still fulfill your dream of homeownership with the aid of a lending institution. Consider the following remedies for re-application.

• Consider opting for a more affordable property, since a high loan amount requested despite inadequate proof of financial stability is also a major factor in the granting or rejection of a home loan.
• Consider applying to a different lending institution with less stringent qualifications and requirements. Pag-IBIG Fund is very popular for this. Banks are stricter with requirements.
• Look for a co-borrower and/or a guarantor to help you establish your creditworthiness. A co-borrower will then act as though he/she is applying for a housing loan with you, whereas a guarantor will act as a further guarantee that you have the capacity to pay for the monthly payment and other fees.

Applying for a housing loan may sound tiring, but the goal of homeownership will always be a better idea than spending money on rent for all eternity. Lumina Homes, the modest housing arm of reputable homebuilder Vista Land, have established a legacy of providing an affordable house and lot for sale in the Philippines.

Furthermore, it was awarded by Pag-IBIG Fund as a top housing developer for its mass housing provision. Pag-IBIG is also the top financing institution that previous Lumina homebuyers opted for. And worry not, as Lumina Homes will also help you with the processes to make your road toward securing a house and lot less hassle.

So what are you waiting for? Get in touch with us today, use our Home Loan Calculator, and we'll discuss all your investment concerns about your dream house purchase!