Navigating the world of home loans can be both exhilarating and challenging, especially for first-time homebuyers and investors. As you embark on this significant undertaking, arming yourself with essential knowledge is vital. Knowing the process, requirements, and options can empower you to make effective and fitting decisions for securing the best deals that suit your financial needs and long-term goals.

In this article, you’ll learn about obtaining a home loan in the Philippines to make your property ownership journey a smoother and more rewarding experience.

Home Loans in the Philippines: 7 Things You Need to Know

A home loan is a popular financing option that also entails significant commitment. Take the time to educate yourself on crucial aspects of home loans so you can be closer to your dream of owning a property in the Philippines.

1. Eligibility criteria

Your eligibility to obtain a home loan is pivotal. As an aspiring homebuyer, you must meet specific requirements for lending institutions to consider your loan application. For example, most lenders set a minimum required income for a home loan in the Philippines.

Besides income, lenders assess various other factors to evaluate loan applications. As such, it’s best to apply for a loan as early as possible so you can determine your eligibility, even before finalizing your property choice. Knowing your eligibility beforehand can save time and disappointment in the future.

2. Joint housing loan

A joint housing loan is an excellent option if you find it challenging to qualify for a home loan individually. This arrangement can make homeownership more attainable if you’re starting to build savings.

In this loan type, you combine your income and resources with another borrower, also known as a co-borrower, such as your spouse or immediate family member, to secure a higher loan amount. It helps improve your chances for approval since you’re using pooled resources.

3. Loanable amount

Before diving into the home search, ascertain the loanable amount you can qualify for or the maximum sum a lender will finance when buying a home or investing in real estate. Lenders typically fund a certain percentage, up to 80% of the property’s appraised value or purchase price. By knowing your loanable amount, you can set realistic expectations and narrow your property options to fit your budget.

4. Additional fees

While the loan covers a significant portion of the property cost, you may encounter additional expenses such as processing fees, earnest money (1), documentary stamps, and other government charges.

Be prepared by setting aside money for these hidden costs to ensure a smooth loan application process. As a rough rule, you should set aside around 5% of the property’s total purchase price.

5. Flexible repayment options

Depending on your situation, lenders offer various repayment options that may be more or less desirable. It would be best to inquire about the available terms, including loan tenure and interest rates. For example, a fixed-rate mortgage will allow you to lock in a fixed interest rate for a specific period, making your monthly repayments predictable at least.

Your repayment plan should align with your financial capabilities and objectives so that you can manage your loan efficiently.

6. Property valuation

Property valuation is a crucial process that determines the fair market value of real estate properties. Local government assessors evaluate various factors, including the property’s size, location, age, condition, and comparable local sales.

Lenders will thoroughly appraise the property you intend to purchase, and understanding how it works can prevent surprises during the loan application. This evaluation can also affect the property tax you must pay for owning a home.

7. Loan insurance

Loan insurance, also known as mortgage or property insurance, protects you and your lender in case of unforeseen events affecting loan repayment. Those events or situations may include disability, critical illness, or death. As the borrower, you want to ensure the loan balance does not burden your family.

Some lenders require loan insurance to reduce risk, particularly for home loans with higher loan-to-value ratios. If you take loan insurance or your chosen lender requires it, you should carefully review the insurance policy’s terms, coverage, and premiums.

Secure a Loan for Your Dream Home

Applying for a home loan can be intimidating for first-time buyers and real estate investors. However, arming yourself with essential knowledge about the process, eligibility criteria, and relevant options will demystify the process and become your ticket for owning a home or investment property.

If you need additional guidance, consider partnering with OnePropertee! We provide expert home loan assistance, ensuring you acquire the best loan terms to suit your needs. Sign up via our website, or check out our blog for more homebuying insights!

Sources

1. Chen, James. “Earnest Money: What It Is and How Much It Is in Real Estate.” Investopedia, July 1, 2023. https://www.investopedia.com/terms/e/earnest-money.asp.