Getting a house of your own, or a place you call home is undoubtedly the ultimate life goal. But if you know better, you’ve probably learned that interest rate is not the sole factor in securing a housing loan. But for first-time homebuyers, given all the overwhelming number of options, the littlest, yet most important aspects of house loan, even loans, in general, are often overlooked.
It is essential to study these housing loan guidelines before jumping into a significant adult move. After all, it’s a lifetime’s worth of hard work and dedication that led you right at this moment.
For starters, a housing loan is a financial option used to fund in purchasing a property; whether a house, house and lot, vacant lot, townhouse or a condo unit – or to finance re-construction or renovation of an existing house property. Home loans are provided by different banking institutions and government home loan agencies. Among the banking institutions that offer home loan options are the Bank of the Philippine Islands (BPI), Banco De Oro (BDO), Philippine National Bank, Metrobank, Security Bank, Chinabank, and others. The PAG-IBIG Fund and Social Security System (SSS), on the other hand, are the most known government agencies that offer home loans.
Aside from this, it is also important to know whether you are eligible to apply for a housing loan or not. Accurate enough, a lender cannot just permit a borrower without the assurance of repayment. That is why all banking institutions have laid out different sets of requirements that home loan applicants must accomplish. But fortunately, due to the increasing demand of real estate loans with a growth rate of about 20 percent each year, Philippine banks have now stepped up with the opportunities, and are now offering more accessible and more flexible terms for housing loans. But as a borrower, you must first assess yourself if you are eligible or not. Applying for a housing loan is such a taxing and meticulous process. You wouldn’t want to be caught up in its mess and end up with a crushed dream.
To guide you, here are the necessary qualifications for prospective home loan borrowers, but bear in mind that the following housing loan eligibilities may vary from different banks:
- Age – Generally, home loan borrowers must be at least 21 years old, but not older than 65 years old. However other banks have a more extended age requirement.
- Income – Just like any loans in any funding institutions, a home loan borrower is required to earn a specified minimum gross monthly income whether a salaried worker or self-employed. More often than not, the expected monthly income ranges from P30,000-P50,000, depending on the bank. This particular requirement is to ensure the borrower’s capacity to pay.
- Citizenship – All Filipino citizens are eligible to apply for housing loans from certain banks in the Philippines. However, not all banks cater to foreign borrowers or Filipinos who are no longer Filipino citizens.
- Employment – All banks require home loan borrowers to be duly employed as they apply for the home loan. Self-employed borrowers or borrowers who run a business must provide more information regarding taxes, business income, and profits, as well as business permits.
Based on the above qualifications, every bank will also require the following documents:
- Government-issued ID’s: driver’s license, SSS ID, passport, postal ID, and others.
- Certificate of Employment (COE), Income Tax Return (ITR) and latest payslips
- Transfer Certificate of Title (TCT), lot plan, vicinity map
- Supplementary documents such as credit accounts or loan statements, bank statements, credit reports
Housing loan, as discussed, is primarily about borrowing money. However, it is significant to note that you can’t just borrow whatever amount of money you like. It varies from which bank you opt to apply for and the appraised value of the property. However, banks can lend up to 95% of the property’s assessed value, and a downpayment of at least 5% must first be settled for a minimum amount of Php500,000 loan.
After assessing your eligibility and deciding on the amount you wish to borrow, you are now down to sorting out which housing loan terms and the corresponding interest rates best suit your budget. Each bank has different interest rates, but most tend to provide a fixed rate usually in the first year of your loan, and the rest of the years subject for repricing. For most people, interest rates are the most crucial factor that makes them decide to push for this critical and expensive lifetime investment.
Housing loans can be broken down into two types based on its interest rate. Each one has its advantages and disadvantages. It’s just up to your needs and budget.
- Fixed Rate Interest
When you opt for a fixed rate interest or fixed-rate mortgage, the monthly rate of interest does not change in the entire duration of your loan and remains on its then-prevailing rate in the market. This allows you to have better financial management because monthly payments are at fixed. You can efficiently allocate a certain amount for it in the budget. Aside from this, when the country’s economy shifts, fixed-rate interest secures you despite the possible sharp increase in the market. However, in most cases, Fixed Rate mortgages are more expensive than the other type.
- Variable Interest
Often called as the adjustable-rate mortgage, a variable interest varies according to the changes in the market interest rate during the entire loan term. Albeit more affordable than fixed rate interest, budgeting is a challenge for this type of home loan. It’s hard to predict the exact amount you need to set aside for its monthly repayments. Variable interest is only favorable when the market rates are failing. However, who knows until when the case is the same, right?
Assuringly, there’s going to be a housing loan guide Philippines that suits your financial capacity and personal qualifications. But the most important question you have to ask yourself before even considering getting a housing loan is this: are you financially equipped enough for this lifetime investment of owning and building your dream home? If so, then pick your dream house and go to your most trusted housing loan providers. Choose the right loan for you.