Category: Housing Loan Financing

House Construction Loan Process

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For those who own a lot, building their dream house is possible through loan financing. The advantages of building your own house is customized the design and features you want and lower the repair cost since you will be using quality materials.

Make sure also to have start up money before proceeding to house construction loan. You will need to pay for building permit, house plan, down payment for the house construction, loan processing fees, etc.

Here are the steps or process of obtaining house construction loan:

  1. Prepare necessary document to be submitted to your lender. These documents include lot tile to be used as collateral and proof of income such as payslip, annual tax, etc.
  2. Meet your lender either bank, in-house financing, or Pag-ibig to get pre-approved in order the amount you can afford.
  3. Decide what kind or type of house you want.
  4. Choose a contractor or house builder and get quote. Hire a builder with a strong reputation.
  5. Submit required documents on your lender in order to process your loan and wait for approval. Your lot will be your collateral to your house construction loan. Other documents are house plans and specifications, contractor’s agreement, vicinity map, total house estimates, etc.
  6. Your lender will visit the site in order to evaluate the construction of house such as the percentage of work. The initial payment of is depends on the work completed.
  7. The lender will usually pay after each interval of work is completed. It usually four installment payments.

Applying Home Loan Tips

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Most people are focusing on finding their dream house without knowing how much they can afford. They don’t even know how much will be the monthly payment their salary can accommodate.

Applying a home loan in the Philippines is complicated but it is possible if you will know the easy way for your loan application.

Here are some tips when applying home loan:

  1. Pre qualified

First step is to know your financial capacity for home loan. During the process of prequalified, the bank will ask your assets, monthly income, liabilities and projected down payment. The mortgage officer will tell you if you are prequalify and discuss you options.  Being prequalify does not mean that you are pre-approved for home loan. This step is let know how much will be able to borrow.

  1. Pre approved

During pre approved process, the loan officer or mortgage officer will required you to submit proof of income, employment certification, recent bank statements, latest income tax returns,  and other related documents so that the bank may know if you have sufficient income to pay off for a home loan.

  1. Housing Loan options

Know the housing options that best suited to your needs and standard of living.  There are three (3) options that available here in the Philippines namely, Pag-ibig housing loan, In-House Financing (from house developer) and Bank Financing.

In-housing financing is a program offer by the developer who wants to buy through a series of payment. There is a minimal requirements but expect the bigger interest rate and bigger down payment than Pag-ibig and bank financing. As Pag-ibig member,  you can avail their home loan services. Many banks nowadays also offers home loan.

  1. Interest Rate

Know interest rates so that you will decide the most favorable.  Also consider other expenses aside from monthly amortization such as processing loan payment, taxes, title transfer fees and other related fees. You should educate yourself regarding housing loan and corresponding interest rate function.

Bank Home Loan Process

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Many people nowadays get help from bank in order to purchase home for their family. Bank is one of the most financial institutions who will provide housing loan such as home purchase, home construction or home renovation.

Bank home loan takes 1 to 2 months of loan processing depending on the submitting of necessary documents of the borrower.

Here are the usual processes of bank home loan process:

1. Fill up application form

You will need to complete the filling out of loan application and submitting and subjecting to pre-approval process.

2. Get preapproved

The lender or bank will review your completed loan application. After reviewing your application, the borrower will received pre-approval letter which confirms the price of home that you can purchase.

3. Loan processing

You will require submitting necessary documents related to financial documents to process your loan. Also, the property will be appraised to know its fair market value.

4. Loan approval

The borrower will received the status of loan after reviewing application and financial information. If the application is deny, the bank will provide other options to obtain financing.

5. Pre-closing or loan settlement

In this phase, the home mortgage consultant will secure any required title, insurance and real estate document to protect against other parties

6. Closing date or settlement date

This is the final signing of mortgage documents and secures the payment to complete the purchase of house and lot

Types of Housing Loan

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Housing loan is a financial help provided by a bank or financial institution in order to buy a house or modify the house. Banks offers housing loan even for small needs about house.
Nowadays, many people are getting help from bank in order to have their dream house most especially who are renting in an apartment. Of course, to be able to be qualified for a house loan, one should have stable job to sustain the monthly amortization.

Here are different types of Housing Loan:

• House Purchase Loan

This type of housing loan is applicable for those who are planning to purchase or buy a house or condo. Most banks offer seventy (70) to eighty percent (80%) of the appraised value of the house or condo.

• House Construction Loan

A bank will give financial assistance for those who already have their own lot and planning to construct their dream house. Construct costs includes permit processing, architect’s fees, manpower expenses and material cost.

• House Improvement Loan

If you are planning to renovate your ancestral house or planning to repair your home, this type of loan is applicable to you.

• House Extension Loan

This type of loan is for those who want to expand or extend their house. This house extension can be dirty kitchen, guest room or storage room.

How to Compute Monthly Amortization for Housing Loan

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Have you ever wondered how bank and other financial institution compute your house monthly amortization?  There are different ways for financing your home, Pag-ibig, bank or in-house financing and these establishments use a factor rate. Monthly amortization composed of principal and interest rate payment regularly over a specified period of time.
You should educate yourself for the computation of your monthly amortization so that you will know how much money you will need to keep for you house monthly amortization.

Here are some data for your monthly amortization:

  • Total Contract Price (TCP) of the property intent to buy
  • Loanable amount
  • Down Payment  (DP) or equity required by developer. Developer usually required 20% down payment. Minimum equity is computed from the total contract price less the loanable amount
    Minimum Equity = Total Contract Price – Loanable Amount
  • Interest Rate. This depends to the Pag-ibig,  banks, in-house financing or developer
  • Factor Rate.  It is a daily rate on the loan

To show:

Assume that you will buy a house and lot, the total contract price is Php 2,500,000.00

Total Contract Price – 2,800.000.00

Interest Rate –  11.25%

Loanable Amount –  2,200,000.00

Down Payment – 500,000.00

Factor Rate – 0.0139168947 (10 years, 11.25%)

Monthly Amortization = Loanable Amount  x Factor Rate

2,200,000 x 0.0139168947

Monthly Amortization = Php 30,617.17 per month for 10 years

It is simple to compute your monthly amortization once you have the complete data.

Are you Ready to Pay for your Dream House

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dream-houseYou are decided to provide your family your dream house since your kids are growing and also tired of renting an apartment.  Buying a home is one of the biggest financial decision that needs to analyze your financial capability since it is definitely not cheap.

 

Here are some things to consider before engaging yourself to pay for mortgage payment for your dream house.

  1. Check out if the family income is capable of having monthly mortgage payments for a least a period of time.  It is likely that you will be paying for mortgage loan for a minimum of 5 to 7 years and sometimes it take as long as 10 to 20 years to pay back a home loan in full.
  2. Verify if you are qualified for a home loan. Having enough money for a down payment does not mean that you are automatically guarantee that your will pass the pre-approval for home loan. The bank will check if you are financially ready to buy a house. Applicant may require to submit a bank statement from the past 6 months and a latest income tax return statement or payslip for the past 3 months so that bank may check if the applicant or borrower has the ability to pay for the loan.  Also, bank will check if the borrower has any existing loans or debt such as credit card history.
  3. Know what you can afford.  Inquire to different banks and lending institution and compare home loan rates. You can collect leaflets or brochures of different banks and know the best offer possible that within your budget.
  4. Make sure to have extra budget for other expenses such as emergency funds. The extra cash should not be taken from home loan budget. Missing your monthly amortization can have big concerns.
  5. Be honest to yourself. Sometimes we make decision out of nowhere and we tend to ignore reality. You need to be honest with yourself and analyze your situation because settling home payments involves a long-term plan which not only includes amortization but also taxes and possibly maintenance and insurance.  Some thinks that buying a home will be easy. One should be realistic about the time, effort, money, stress and hassle toward being ready to move forward. Talk to some people who can show you the ins and outs of real estate and purchasing a home and ask question about the things you don’t understand before making decisions. There always time for everything.
  6. Be mentally ready. Make sure that you and your partner are not just financially ready to start monthly amortization but ready also physically, psychologically, and emotionally prepared.  Buying a home is like having a child altogether again.

Purchase House and Lot Pag-ibig Loan

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purchase-house-and-lot-pag-ibigIf you have no enough budget for buying a house and lot, Pag-ibig will help you to finance your house and lot but make sure that you are eligible for Pag-ibig loan.

Here are steps in applying Pag-ibig Loan:

  1. Attend for their counseling. You have to called Pag-ibig for registration and schedule.
  2. Upon attending, bring housing loan application with recent ID photos of borrower, a form that you can download from their site or get at Pag-ibig processing office and 2 pcs 1×1 id pictures, membership status verification slip (MSVS) form, proof of income such as income tax return and latest 1 month payslip, notarized certificate of employment and compensation
  3. After attending the counselling and submission of all the documents needed, you will call Pag-ibig if the MSVS is approved.
  4. If the MSVS is ready, you have to submit other documents like contract to sell, certified copy of TCT by Registry of Deeds, location plan and vicinity map, photocopy of tax declaration.
  5. They will schedule for the assessment of the property you want to purchase/
  6. Pag-ibig will assess the loan application for approvae
  7. When approved, borrowers signs notice of approval
  8. The borrowers will processes the required document before loan is released.

Here are the documents needed to be submit before the loan release:

  1. TCT/CCT in the name of the borrower with proper mortgage annotation in favor of Pag-Ibig Fund (Owner’s Duplicate Copy)Certified true copy of TCT/CCT in the name of the borrower with proper mortgage annotation in favor of Pag-IBIG Fund (RD’s copy)
  2. For properties that are subject of an heirs lien under Section 4 Rule 74 of the Rules of Court, surety bond (not an heir’s bond) that shall answer for the payment of the outstanding loan obligation still due to the Fund in the event that another person including an heir of the registered owner would lay a claim against the property offered as security
  3. Photocopy of New Tax Declaration and Updated Real Estate Tax Receipt in the name of borrower and co-borrower, if applicable
  4. Loan Mortgage Documents
    a.    Loan and Mortgage Agreement duly registered with Registry of Deeds with original RD stamp
    b.    Deed of Absolute Sale duly registered with Registry of Deeds with original RD stamp
    c.    Duly accomplished/notarized Promissory Note
    d.    Disclosure Statement on Loan Transaction

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House Construction Loan Need to Know

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house-construction-loanI and my husband have been through house construction loan through East West Bank. Because of our determination we are able to provide all the documents needed to achieve our goals to have our own house.

The first step we done is to know the requirements between Pag-ibig and banks. Based on what we see, Pag-ibig requires more documentation to submit than in banks. Also, we go to different banks to inquire about their requirements as well how much will be the interest rate. Since that time East West Bank offered the lower interest rate so we decided to pursue our housing construction to East West Bank. That time they offered 8.5 percent per annum. Although Pag-ibig also offered lower interest rate, there are more documents to submit than in East West Bank.

We provides documents such as title, income statement such as pay slip, tax declaration, vicinity map, employment certificate, proof of income, income tax return, identification cards, bank statements, etc.

After submitting all the necessary documents to process the loan, then the bank will send you a notice of approval. They told us to wait for 2 to 4 weeks but it takes us 2 months for our notice of approval. Our loan approved is amounting to Php 850,000.00, 10 years to pay. Our monthly amortization will be Php10,000.00 plus insurance fee and other fees.
When the notice of approval received, the accessor will visit the site of house construction to verify the percentage of the progress of work because banks, pag-ibig and other lending institution release money depending on the progress of work. East West will release money a scheme of 30% upon first loan release, 60% for second release of money, 90% for third release and 100% last release of money. In our case, it is very hard because we have no enough budget. What we did, we ask some friends and relatives to lend us some money in order for us to fund our construction so that bank will also release money.

My tips before pursuing your house construction loan are the following based on our experience:

  • As much as possible inquires to all banks which offers house construction loan so that you can analyze which bank are suitable for you.
  • Make sure to have initial budget for the house construction. As much as possible you have at least 30% of your total house cost because most banks and lending institution release payment upon 30% of work house completion.
  • Verify all fees requires for the house loan such as processing fees, accessor’s fee, etc.
  • Know if there are hidden fees aside from interest rate such fire insurance fees. Know how much you have to add for your monthly amortization.
  • Make sure that you’re the interest rate is fixed within the payment period. There are banks who have moving interest.
  • Inquires also to your banks if there are rebates in case that you have been pay early. Just on our case, we do not rebate after paying the full amount for two years since our contract is for ten years. Some banks offers rebates.

Bank House Loan Checklist

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Housing loan requirements may be vary depending on the banks and lending institutions. Here are some checklist to provide your insight of the documents you have to prepare when planning to avail housing loan.

bank-house-loan-checklist

  • Bank Housing Loan Application Form
  • Two (2) valid identification cards
  • If married, both spouses need to sign on the application form
  • It with co-borrower or co-mortgage, separate form is needed
  • Certificate of Employment and Compensation
  • Latest or Recent Income Tax Return (ITR)

For Overseas Worker

  • Contract or Certificate of Employment authenticated by Philippine Consulate
  • Proof of monthly remittances
  • Notarized or authenticated Special Power of Attorney
  • Crew Contract and Exit Pass validated by POEA for seaman

For Practice of Profession

  • Clinic Address / Schedule and contact numbers for Doctors
  • Bank Statement for the last 6 months

For Self-Employed

  • SSS / GSIS / Driver’s License / PRC License
  • DTI Registration / SEC Registration
  • Income Tax Return with Statement of Assets and Liabilities
  • List of Trade References at least 3 names with phone number of major suppliers/customers
  • Bank Statements for the past 6 months
  • Articles of Incorporation and By-Laws with SEC Registration Certificate

For Collateral

  • Clear Copy of Owner’s Duplicate Copy of TCT / CCT
  • Lot plan with Location or Vicinity Map duly certified by licensed Geodetic Engineer
  • Tax Declaration photocopy / Tax Receipts or Tax Clearance
  • Endorsement Letter / Computation sheet
  • Contract to Sell from developer stating the contract price for accredited developer or project

Getting Housing Loan Tips

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home-loan-tipsGetting housing loan is stressful most especially if you do not know the first step. There are many borrowers who is denied because they do not prepare and they do not know the process.

Here are some steps to maximize your chances:

1.    Assess your financial capacity
The lenders usually ask about your assets, monthly income, liabilities and projected down payment. They assess your income, credit history and debt service ratio.

2.    Clear your credit history
As borrower, you should review your credit history before submitting a house loan application.  Banks and other lenders are usually share information on delinquent or non-paying borrowers and history of non-payment is a big red flag for lenders.  You should first clear your credit history by paying bills on time, paid credit card balances and if you have unpaid load be sure not to mess up your credit during the loan processing as diligent lenders.

3.    Check with mortgage calculator
Mortgage calculator will calculate your monthly mortgage payment under different housing amount, interest rate, loan tenure, and annual income scenarios. In this case, you will be able to decide what finances can handle the payment scheme.

4.    Analyze your finances
Find out what you can spend before bidding on properties.  Make sure that your house loan will be suited to your finances because if not, it will cause you a lot of emotional and financial stress in the future.

5.    Maintain stability
Lenders prevent risky clients so it is necessary to become financially stable at the time of your house loan process.  It is essential that you maintain a stable cash flow and avoid new debt. Also, try to stick with your employer because taking a lower-paying job or quitting to become self-employed is another red flag for lenders.

6.    Increase your savings account
Lenders will check your savings account if you have enough money to pay off a various cash expenses such as down payment, home appraisal, loan processing fee and so on. Having a zero cash is a quick way to disapprove your housing loan application.

7.    Prepare necessary documents
Make sure that all documents needed are prepared including recent ID, proof of income, employment certification, ITR, payslips and other pertinent collateral documents. Lenders needs evidences of what you have to say.