Applying for a housing loan in the Philippines can either be easy or challenging depending on various aspects and considerations. With that, it is extremely important to know the basics of housing loans in the Philippines for you to successfully build and have a house you can call your own.
Housing loan is a credit that is specifically for the purpose of obtaining ang buying a house, lot, condominium, or any other types of living spaces. I can also cover finances for renovation and house-building of an already owned lot. There are two main facilities that offer a housing loan here in the Philippines: the PAG-IBIG Fund and banks.
What is PAG-IBIG Fund?
The Home Development Mutual Fund (HDMF) or PAG-IBIG Fund is a government-owned agency spearheaded by the Department of Human Settlements and Urban Development (DHSUD) that aims to secure and offer affordable house financing and loans for the Filipinos through the national savings program initiative.
PAG-IBIG housing loan is an accessible opportunity for Filipinos looking for an affordable house financing option since they are mandatory for SSS and GSIS-covered employees. Moreover, PAG-IBIG housing loans are easier to process and be approved compared to banking loans since it is an active initiative of the government.
Moreover, PAG-IBIG housing loans are lenient to people who are actively paying their monthly fees and are open for people with minimum paying salaries. PAG-IBIG housing loans offer a maximum loan amount of 6 million pesos (Php 6,000,000.00) that can be loaned through multiple applications.
If you want to apply for PAG-IBIG Fund housing loan, here are the qualifications that you need to meet:
- 24 months member of PAG-IBIG Fund
- Have paid 24 months of contribution fees that can be paid in a lump sum
- No more than 65 years old during the loan application
- No more than 70 years old at the date of loan maturity
- No existing loans from other financial facilities
- No existing cancelled, foreclosed, or brought back loans from PAG-IBIG
- Must be legally able (18 years old and above) to acquire real property
What are Bank Housing Loans?
The other option for Filipinos to get housing loans is through various banks. Luckily, there are plenty of banks in the Philippines that offer housing loans and you don’t need to be a member in order to apply for one.
Bank housing loans have a longer process and significantly higher interest rate compared to PAG-IBIG Fund. However, a lot of people prefer bank housing loans due to their higher maximum loan amount that can go up to 50 million pesos in contrast to PAG-IBIG fund that offers a maximum loan amount of 6 million pesos.
The qualifications and requirements for obtaining a bank housing loan can vary depending on the bank. Here are the basic qualifications that can be applied in most banks in the Philippines if you want to apply:
- Must be between 21 to 65 years old
- Tenured for at least two (2) years in your current employment
- At least three (3) years of profitable operations for business
- Must meet the required minimum monthly gross income
Housing Loan Process
After understanding the various housing loan options and the qualifications of your chosen financial facility, you need to understand the housing loan process. Housing loan processes differ depending on the financial facility and the amount of loan that you are trying to apply.
PAG-IBIG Housing Loan Process
PAG-IBIG housing loan process can be more lenient compared to bank loan process. The process can be easier and faster if you have already met the qualifications for PAG-IBIG housing loan. It usually takes 30 working days to process once you’ve submitted your complete requirements.
There are five essential processes in PAG-IBIG housing loans. The first step of the process to complete the requirements needed for the housing loan application. After the completion, the next step is to submit the housing loan application along with other necessary forms and pay the 1,000 pesos processing fee.
The third step is to wait for your Notice of Approval (NOA) and Letter of Guarantee (LOG) issued by the PAG-IBIG Fund once the housing loan application is approved. The fourth step is to submit the Notice of Approval (NOA) requirements to PAG-IBIG Fund for them to release your check and the last step is to receive your loan through the bank.
You can start paying for your monthly amortisation payments once you receive your loan proceeds.
TIP: If you’re buying straight from the developer, they will be processing your housing loan on your behalf. You just have to submit all the complete and necessary documents and comply with interview requirements.
Bank Housing Loan Process
Bank housing loans can vary between banks and the amount of the housing loan you applied for. Compared to PAG-IBIG Fund, banks have stricter measures to ensure that you are credible and able to pay for the loan. Understanding how the bank housing loan process works will be beneficial for you to have more chances of approval.
The first thing you need to do is to ensure that all the qualifications they require are met. After that, you can fill in their loan application form along with the additional necessary documents and pay the processing fee which ranges from 0.25% to 0.50% of the requested loan amount.
After 2-5 working days, the bank might invite you for a discussion about the housing loan’s details and specific purpose. They will then start with the valuation of the documents particularly your income, background information, employment, and residence. Oftentimes, banks visit the applicant’s residence in order to verify the information they have submitted through documents.
After the valuation comes the most crucial step which is the sanction or the approval process. Once approved, documents and other legalities should be processed to move on with the final loan deal and signing of the agreement.
Once the agreement is signed and closed, you can now disburse the loan through the lending bank. You can start paying for your monthly amortisation payments once you receive your loan proceeds.
Since the bank housing process is significantly longer compared to PAG-IBIG, the process usually takes 2-4 weeks before approval. This does not include the processing of necessary papers and documents for the final loan agreement. Thus, you need to be ahead of your schedule if you want to secure a bank housing loan for your house financing.
Additional Fees to Consider
Aside from the processing fee and downpayment, they are other additional fees you need to know about before applying for a housing loan. Being able to know about additional fees will help you prepare for them once the loan is settled.
- Transfer tax for the transfer of residential property that is usually around 0.5% to 1.5% depending on the house’s location.
- Notary fees for the documentation and paper processes.
- Documentary stamp tax for the legal record of the acceptance of the loan and agreement
What are the Reasons for Being Denied a Housing Loan?
There are various reasons why a housing loan, either applied through PAG-IBIG Fund or bank, can be denied. Here are some of the reasons why:
- The lender, either PAG-IBIG Fund or bank, does not have concrete assurance that you are able to pay for the monthly amortisation payment once the loan was settled.
- Your monthly income is not sufficient for the amount of loan you have applied for.
- You did not comply with the requirements needed by the lender.
- Issues about the amount of the loan amount that you have applied for.
Oftentimes, the financial facility will let you know the reasons why they declined your housing loan application. This can be useful for you to improve your application once you apply for another housing loan to a different financial facility.
Tips for Applying a Housing Loan
There are a few tips and reminders that you need to know before applying for a housing loan which can help you have a better chance of approval. Here are some of them:
- Create a strong housing plan. By doing this, you will have a more concrete and specific purpose for the housing loan that will reflect with the amount of loan you want to apply.
- Secure your finances before applying for a housing loan. Pay up all your credits and debts if you have any as it will reflect with your credibility and eligibility to pay for the monthly amortisation payment. This will also boost your morale when you are applying for a housing loan.
- Look for the best offers you can find. Search for various banks and other financial facilities that offer housing loans other than PAG-IBIG Fund or your most trusted bank. Make sure to compare their qualifications, interest rates, loan terms, and downpayments to get a better deal.
- Save money for the application. Aside from the process fee, registration fee, and downpayment, there are other additional fees that you need to consider before applying for a housing loan. Make sure that your finances can handle the fees and additional payments needed to have a smoother transaction.
- Seek for help. Look for professionals and people who have diverse knowledge about housing loans and laws about it. This will help you choose the best option and understand the housing loan process better.