Dec 4, 2017

What You Need to Know About Housing Loan

The types of home loans vary for every loan purpose. Depending on the property you want, here are the most common types of Housing Loan purpose you can apply in Philippine banks.

Purchase of Property
This applies for all types of property home loan. From purchasing a vacant lot, house and lot, a condominium unit, or a townhouse.

Home Construction/Home Improvement Loan
For individuals looking to renovate their homes, or use the loan amount for home construction.

Refinancing/Reimbursement of Acquisition Cost Loan

Home refinancing means paying off your current home loan with a new one. This applies when you have an existing home loan that you’ve paid for regularly, and you want to borrow money from a new bank with a lower interest rate compared to your existing loan. This is basically a type of balance transfer, in the form of a new home loan.

Not only does it reduce (or increase) the monthly amortization for your current home loan, but it can also extend your loan payment to a much longer term. It really all depends on your capability to repay the loan. For some, they may even opt for higher monthly amortization so they can pay it off much sooner, but with a better interest rate than the ones they’ve signed up for years ago.

Home Equity Loan

Home Equity Loan is a type of secured home loan where the individual applies for a housing loan, with the property set as a collateral. It’s also known as a Collateral Multipurpose Loan because since the property serves as the collateral, the loan purpose is not just limited to funding the property. It can also be used for other purposes such as tuition fees, medical expenses, travel expenses, or even buying a new car.

Note that most banks only finance sixty to eighty percent (60% – 80%) of the appraised value of the property, and you will have to shoulder the remaining amount for the down payment.

Home Loan Application Process

Compare different home loan rates and find the one that fits your monthly income best. When you’ve found the right bank to apply for, here are the following general requirements that you’ll need to submit when applying for a housing loan.
Eligibility requirements:
·         Filipino citizen, at least 21 years old, and not older than 65 years old upon loan application
·         For Foreigners, must have a permanent resident status and valid working Visa
·         Minimum monthly income must be at least P50,000
·         Employed applicant must have a stable source of income of at least two years with the current company
·         Self-employed applicant must have at least two years of regular and profitable business operation

Document requirements:

While specific documents may vary per bank, here are the most common document requirements that banks look for in Home Loan applicants:

·         Completed and signed bank application form
·         At least two (2) clear copies of valid government IDs with photo
·         Marriage Contract, if applicable

·         Latest BIR Tax Return or W2 Form
·         Latest pay slips of at least three (3) months
·         Certificate of Employment indicating income

·         Business registration documents, DTI, SEC, Articles of Partnership or Incorporation
·         Audited financial statements of last two (2) operating business years
·         Income Tax Return (ITR)
·         Bank Statements, at least three (3) months
·         Trade references – list of suppliers, customers, or affiliates
·         Lease contracts or property documents of business establishment/s

How to Qualify for a Housing Loan

It’s easy to qualify for a housing loan in the Philippines if you’ve met the above eligibility requirements. more than that however, you must also be financially prepared in taking on this responsibility of monthly payments, according to the loan term you chose.

·         Pay off all your debt before applying for a housing loan
All banks process applications with due diligence, and will look into your credit history. Make sure you don’t have delinquent debts that will delay or stop your home loan application.

·         Build a solid credit score
If you find yourself unable to apply for a loan because of existing debt or loan, develop good credit habits by first paying it off, as stated above, and set up a savings account on the bank you owe money from. This way they’ll see the growth of your funds, and you can even use that to apply for a secured credit card when you’ve saved up enough money on your account.

·         Build a solid work history
Not only do you need to work on keeping good credit score, but you must also show banks that you have good work tenure under your belt. If you’ve transferred employment within less than two years or a year, it may be harder for you to get approved for a loan. Banks consider a two-year work tenure as the most amenable work experience for loan or credit card applicants.

·         Build a solid stream of income
You must be able to have enough cash and a steady stream of income to apply for a bank loan. And since banks approve up to 80% of the appraised value of a property, you must have enough money to shoulder all the costs that come with it.

With all this in mind, you’re all set to apply for a housing loan. Compare home loan rates from the leading banks, and use our online home loan calculator to get an estimate of your monthly amortization.

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