Buying your dream home is one of the best achievements you can have. However, unprecedented circumstances happen in our daily lives. This hinders our next step in achieving our dream home goal. Luckily, housing loans make our lives easier in doing that.
Applying for a housing loan in the Philippines is a tedious process. But if you are equipped with the proper requirements, it shouldn’t be difficult at all. For starters, you can start by asking yourself whether a housing loan is the right financial solution for you or not. To help you decide, here are some things you must consider.
Do You Have the Financial Capacity?
This is the most important aspect before you apply for a housing loan. Before you strike a conversation with a potential lender, evaluate your finances first. Knowing how much money you have is the first step to be prequalified in your housing loan.
In talking with your lender, they will first ask about your assets, monthly income, liabilities, and other financial statements. The lender will also ask for your projected downpayment, and this will depend on what type of house and housing loan you will choose. Since most housing loans in the Philippines range from Php 400,000 up to Php 1 million, you will need at least a 20% downpayment.
Your lender will explain everything about the housing loan and what options to choose from once you prequalify. Remember that being prequalified is not equivalent to having your housing loan application pre-approved. You will only get an estimate of how much you can borrow from your potential lender.
If you assess your income and know it won’t be a risk for you and your family, then applying for a housing loan is perfect.
Have You Cleared Your Credit History?
In applying for a housing loan, you have to clean up your credit history first. Lenders and banks share information about the prospective borrower to check if the person is a delinquent or not. If there is any sign that you did not pay for your fees, it’s already a red flag for the lenders and banks.
Clearing up your credit history is also an excellent way to manage your money properly. Applying for a housing loan requires a lot of financial management to prevent you from paying monthly with soaring penalties.
That being said, remove the assumption that your housing loan will be approved even if you have an outstanding balance from other financial institutions. Lenders and banks will most likely deny your application because you are a delinquent payer.
Clean your credit history by paying bills on time, settling unpaid loans, eliminating credit card balances, etc. You can also request a certificate from a lending institution to prove that you are free from any outstanding balance and debt-free.
Finally, prevent yourself from committing any other loan processing problems while your housing loan is waiting to be approved. Lenders and banks will double-check your credit history over time, so always be mindful.
Are You Familiar About Interest Rates?
Applying for a housing loan doesn’t end at paying for the monthly payments. There are other expenses you need to pay, such as interest. The usual interest rates in the Philippines are those imposed by the Bangko Sentral ng Pilipinas (BSP), which are at six percent. However, some private or commercial institutions have higher interest rates.
For example, if you have a housing loan payable in 120 monthly installments for a house and lot, expect that there will be an amortization depending on the interest rate by your lender. Aside from amortization, you will also consider real property taxes, transfer of title fees, etc. So, if you know how amortization works and the payment of other expenses, then you’re good to go in securing a housing loan.
Have You Decided What Housing Loan Options to Choose?
There are different financial institutions in the Philippines, and it will depend on what type of housing loan you prefer. The most common housing loan options are through home developers (also known as in-house financing), bank financing, and the PAG-IBIG Housing Loan.
In-house financing is usually offered by paying the housing loan in fixed monthly installments. Borrowers only deal with one company for more convenience for both parties. While this may be beneficial, you may expect that the home developers require a bigger down payment and higher interest rate.
Banking institutions offer flexible banking options with the most competitive interest rates. There are different banks to choose from, and some can be strict with their terms and conditions.
PAG-IBIG housing loan lets you purchase a residential house and lot not exceeding 1,000 sqm, townhouse, or a condominium unit that includes a parking slot. Their program is beneficial to most borrowers with affordable rates.
There are also two types of housing loans. The first one is the conventional home loan, where the borrower pays monthly for a specific term or period. Most financial institutions and banks provide housing loans with a tenure of up to 20 years. This type of housing loan is fixed, and it is beneficial to the borrower as they know how much they need to pay and can properly manage their finances.
Another type of housing loan is the flexible housing loan. This type of housing loan is linked to a current bank account, and borrowers can reduce the interest rates by depositing cash. They can also pay for the principal amount of the housing loan at any time they wish.
Knowing the different financial institutions and housing loan options saves you time, energy, and money in the long run. It’s always best to be well-equipped about how housing loans work to prevent any problems and misunderstandings in the future.
You Want to Have a Valuable Asset in the Future
Are you planning to invest? You may want to consider real estate investment. Some people think that properties depreciate, but it’s the other way around. Houses appreciate over time, and it is one of the best investments in today’s time.
Once you have settled your housing loan or if your housing loan has matured, you own the property, and it is more valuable than the previous price of the house. This means that you will gain a significant profit if you want to sell your home in the future. Otherwise, you can pass it on to your heirs.
Ready For the Next Big Step?
Once you assessed everything, it’s now time to take the next step in getting that dream house. A housing loan shouldn’t be difficult if you are knowledgeable about the real estate market. There are tons of benefits to a housing loan, so be sure to consider applying for one.