10 Important Housing Loan Basics
Very few of us are fortunate enough to buy our desired property on a cash basis. Most will inevitably have to deal with a lending institution like a bank, PAGIBIG, GSIS, or a coop. Here are some basic information to start you on your road to accessing a housing loan.
1. Income Requirement
First off, here’s a quick way for you to assess how much you can borrow from a bank or any lending institution. The general rule is that your monthly income should be no less than 3 to 3.5 times as big as your monthly amortization.
2. Documentary Requirement
Aside from your usual proof of identity, you also need to have documentary proof of income. Today, your ITR is of utmost importance, especially if you are self employed or have several sources of income. Other proof of income include audited financial statements of your business, payment slips, remittances, bank statements, employment contracts or certifications, and other valid documents that can prove how much you actually regularly earn.
3. Bank Accreditation
Banks have accredited developers. While you may get a housing loan from almost any bank if the property you are eyeing meets the minimum requirements, banks actually have accredited developers. For accredited developers, home loan processing and approval would generally be easier and faster and will not require property appraisal anymore. Moreover, they may have special interest rates or higher loanable amounts.
Getting a loan from a bank other than your preferred one may at times be worth the inconvenience.
4. Fixed Interest Rates
Know that interest rates offered are only good for a certain period specified by the borrower. For example, a bank might give you a fixed rate for, 5 years for a 10 year housing loan. That means that the interest rate for the first 5 years will be guaranteed to be the same but may change after the fifth year of payment depending on the economic climate by that time. Banks or PAGIBIG usually give you options as to how many years you want the interest rates to be fixed. Of course, the longer the time you fix your interest, the higher the rate. This is because they will guaranty you the rate no matter
what happens to the economy for that agreed period.
5. Processing Fees
There are fees that come with getting a housing loan. One such fee is the loan processing fees which is around 2.5% of your borrowed amount, depending on the bank. Banks will ask you to pay this in cash.
6. Appraisal Fees
Then there is the appraisal fee for non-accredited developments. This would be around P3,000, more or less depending on the bank. This is normally not charged to the borrower if the loan is approved but will be collected if not.
7. Letter of Guaranty (LOG)
The LOG is a document issued by a bank stating that you are approved for a loan pending the release of the money. This will come in handy when you need to transfer to a house or condo after complying with other developer requirements. Some developers, however, do not honor an LOG and would wait for the actual payout. Some developers accept the LOG even if you have paid only 5% of the contract price and may allow you to start using your unit already.
8. Nature of Interest Rates
Note that interests are constantly changing and updated to reflect the current economic status of the country. The rates now may not be the same as when you will apply for the housing loan more than 6 months to 1 year from your reservation date when you will process your actual loan application. The rates even become more unpredictable for loans which you will apply for 2 to 3 years down the road, as in the case of pre-selling projects.
9. Age Requirement
Only those of legal age are allowed to get a housing loan. The maximum length of the term of your loan will be limited by your age. Normally, you should complete the amortization of your loan before you reach age 65. That is, you cannot avail of a 30 year PAGIBIG loan, for example, if you are now 50 years old. The most you can get then would be only 15 years. There are instances, though, that loans are allowed beyond 65, and that is if you are able to find a company that is still willing to insure the buyer beyond that age.
10. Get Bank Approval First
Ideally, you should get bank approval first before you start looking for a property. This will simplify your search process since you will know beforehand the price range of the properties you may purchase. This will save you time, effort, and even money.
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