Condo Financing: A First-Time Buyer’s Guide to Home Loans

Purchasing a home is a huge responsibility and requires tons of work for the whole process to be seamless. If you are facing financial challenges or you simply want a manageable financing scheme, getting a home loan is a smart choice.

Before you apply for a home loan to buy a condo in Cebu, you should know everything about home loans in the Philippines so that you won’t get overwhelmed once you start applying for one. To help you out, we made a comprehensive guide on how you can get a home loan.

Home Loan Dictionary

Understanding home loan jargon is an important first step in learning how to apply for home loans. Here are some of the common terms you’ll come across throughout the guide:

• Home loan

A home loan is an amount of money you borrow from a financial institution. People usually use the borrowed money to buy a house and lot, a lot, or a condominium unit. Some lenders allow you to use the funds for renovations, construction, or refinancing an existing home loan.

• Payment terms

Payment terms refer to the agreement between you and the financial institution regarding the expectations for payment. The terms will outline when, how, and by what method the payment will be provided. It’ll also include details on the penalties for missed payments.

• Interest rate

Interest rate is the amount that the lender charges you for giving the borrowed money. Interest rates are expressed as a percentage of the principal (the amount of borrowed money). For home loans, interest rates are typically charged on an annual basis.

• Amortization

Amortization is the process of paying off your outstanding balance with the financial institution once you make a loan. It’s done through scheduled and predetermined installments that include the principal and interest.

4 Types of Home Loans

Whether you plan to make your condo your main residence, second home, or a property to rent out, home loans are extremely helpful for condo financing. There are a few kinds of home loans in the Philippines that can help you with your purchase. These include:

1. Bank financing

Most banks offer home loans with flexible terms and lower interest rates than third-party financing companies. However, the application requirements can be strict. To qualify as a principal borrower, you’ll need to prove that you have a job, stable income, or thriving business.

2. In-house financing

You can apply for a home loan from your property developer. They have flexible terms and installment options. Compared to banks, in-house financing has more lenient requirements. However, interest rates can be higher (up to 18%).

3. Pag-IBIG Fund

If you’re a Pag-IBIG member and active contributor, you can apply for a home loan from this government agency. You’re qualified for a home loan application if you are not more than 65 years old and are self-employed, salaried, or an overseas Filipino worker (OFW).

As a Pag-IBIG member, you can borrow up to P6 million (subject to terms and conditions). Additionally, the interest rates are slightly higher than banks but lower than in-house financing.

4. Social Security System (SSS)

Aside from retirement benefits, SSS also offers home loans for private-sector employees. This type of home loan is best for employed Filipinos and OFWs actively paying their monthly contributions. With this agency, you can borrow up to P2 million at a maximum of 30 years payment period.

Home Loan Application Checklist

You need to be eligible for a home loan before you can start applying, and your eligibility will help the lender determine your ability to pay your loan. The exact requirements will vary depending on the lender, but usually, the borrower’s eligibility is based on:

• Income – How much you earn plays a major role in your credit standing and financial stability. Lenders will look into your income before they approve your housing loan.
• Age – Lenders consider your age to determine the maximum length of your home loan term. For example, if you’re already 50 years old, they won’t allow you to apply for a 30-year loan because most lenders require you to pay loans before you turn 65.
• Spouse’s income – If you’re going to apply for a home loan with your spouse, lenders will also evaluate their income.
• Dependents – Lenders will also look into the number of dependents you have to determine your ability to pay.
• Stability – You need to be employed for at least two years to apply for a home loan. If you’re self-employed or a business owner, there is additional information you need to present such as profits, taxes, and business permits.
• Credit history – Data about your record of responsible repayment of debts is gathered from banks, government agencies, credit cards, and collection agencies. Good credit history will prove that you have a stable income and pay your dues on time.

Home Loan Application Requirements

For the official list of home loan application requirements, make sure that you check in with your lender. To get an overview of what lenders ask from their borrowers, here are some of the general requirements:

• Completed application form 
• Two valid IDs:

– Philippine Passport

– Driver’s License

– Unified Multi-Purpose ID (UMID)

– Professional Regulation Commission (PRC) ID

– Overseas Workers Welfare Administration (OWWA) ID

– Voter’s ID

– PhilHealth ID

• Marriage contract, if applicable.
• Application form for co-borrower, if applicable.
• Proof of income

– For locally employed: latest income tax return (ITR), payslips, or Certificate of Employment with Income (COEI)

– For self-employed: audited financial statements, bank statements, or certificate of business registration from the Department of Trade and Industry (DTI) or Securities and Exchange Commission (SEC)

– For OFWs: proof of remittance, crew contract, or consularized COEI

• Collateral documents, like:

– Contract to Sell (CTS)

– Reservation agreement

– Endorsement letter 

– Tax declaration

• Bank statements for the last three months, credit accounts, or loan statements
• Authorization to conduct a background check

How to Apply for a Home Loan

Home loan processes will depend on the financial institution you decide to borrow from. Some lenders have extensive procedures, while others have quick and easy approvals. Here’s how you can apply for the main types of home loans in the Philippines:

• Bank financing

Step 1: Check your qualifications. You must be at least 21 years old to apply and not more than 65 years old at the end of your loan term. Additionally, you must have a stable source of income and meet the bank’s minimum gross income requirements.

Step 2: Calculate your quoted loan amount and monthly amortization. Some banks have home loan calculator features on their website that you can use to get an idea of how much you can borrow.

Step 3: Prepare the requirements. Some of the requirements banks will ask for are basic documents (valid IDs, marriage contract), income documents (payslips, employment certificates), and collateral documents.

Step 4: Fill out, sign, and submit your application form. Most banks entertain both online and in-person application submissions.

• In-house financing

Step 1: Communicate with the property agent to be informed of the terms and conditions of the developer’s in-house financing loan option.

Step 2: The property agent will request an inventory holding of the preferred pre-selling unit. Afterward, the developer will hold the unit on request.

Step 3: Pay the reservation fee within the developer’s deadline.

Step 4: Submit the required documents. These documents may include the signed Reservation Agreement (RA), Buyer’s Information Sheet (BIS), Bureau of Internal Revenue (BIR) Form 1903/1904, and valid IDs.

Step 5: The developer will verify your requirements.

Step 6: The developer will book the reservation as an official sale and coordinate the CTS.

• Pag-IBIG

Step 1: Prepare the requirements: loan application form, proof of income, one valid ID with signature, and a selfie photo with your ID card (if you’re applying via VIRTUAL Pag-IBIG).

Step 2: Submit your home loan application. You can submit through Virtual PAG-IBIG or at any PAG-IBIG Housing Business Centers or Fund branch.

Step 3: Receive your Notice of Approval (NOA) and Letter of Guarantee (LOG). If your application is in order and complete, Pag-IBIG will advise you where you can claim your NOA and LOG.

Step 4: Complete the requirements in your NOA within 90 days.

Step 5: Receive your loan proceeds. Within 10 working days after your loan approval, Pag-IBIG will notify you of how your loan proceeds will be released.

• SSS

Step 1: Apply and submit the required documents. You can file at the nearest SSS branch or the Housing and Business Loans Department, 5/F, SSS Bldg., East Avenue, Diliman, Quezon City.

Step 2: Upon application, pay the application fee and inspection fee.

Step 3: Wait for SSS’ approval and instructions on how you can get your loan proceeds.

5 Tips to Get Approved

Before you file for a home loan application, you should prepare with the right strategies in place to boost your chances of getting approved. Here are a few tips you can consider:

1. Get your finances in order

Lay out everything you need to pay for when you apply for a home loan. These can be downpayment, transfer taxes, and other fees like application fees. It’s also best to pay off any existing debt you may have. By doing this, you’ll be able to establish a good credit history.

2. Build your savings

Once you’ve identified all the payments you need to shell out for, save as much as you can. As a future homeowner, you’ll need to prepare for the expenses that come with living in a condo. You’ll also leave a positive impression on your lender, proving your financial capacity to pay.

3. Prepare the required documents

Lenders will evaluate your qualification through the documents you submit, so you must prepare all the relevant documentation. Make sure that your valid IDs aren’t expired and have the same addresses. Organize your financial documents, like your payslips and other proof of income.

4. Do your research

There are numerous options when it comes to home loan lenders. Compare interest rates, loan terms, and downpayments from different financial institutions. By looking into your options, you can better understand which home loan can give you a better offer and a higher chance of approval.

5. Ask for professional advice

Real estate professionals can help you choose a home loan that fits your lifestyle and financial needs best. Their services will also make your loan application smoother because they’ll guide you along the way.

Take the Next Step

Once your home loan has been approved, the most difficult stage of purchasing a home is over. You can now get a condo in Cebu! Just remember to pay your dues on time to avoid penalties and continue to enjoy your new home.

If you’re looking for your first condo, we may have the best choice for you. Mandani Bay offers beautiful and modern living spaces and residences designed by top-tier developers. Live your urban lifestyle dreams by investing in a property strategically located in a rising region with a promising economy and rich culture.