Housing Loan in the Philippines: Everything You Need to Know

Buying a house in the Philippines poses various challenges, especially now that the market prices of properties are gradually increasing, which is why most property seekers read dozens of homebuying guides first before going through the transaction. With the kind of market that we have today, you might be asking yourself if it is more practical to buy a house as soon as possible or secure a housing loan first.

Here’s everything you need to know about housing loans in the Philippines:

What to Find First: A Home or a Housing Loan?

Hands holding a piggy bank and a house model

Q: What are the advantages of buying a house first?

A: Buying a house as early as now will allow you to take advantage of property appraisal. As the market value of real estate properties continues to increase, buying a house now will give you excellent investment returns. 

Q: What are the repercussions when buying a house without a housing loan?

A: Even if you have saved up enough to afford the downpayment for your dream home, there are more things to consider. When you buy a house, the payment terms are among the most important things you should consider. After the downpayment, you might be required to pay a higher monthly mortgage, which is why most homebuyers make sure to secure a home loan first so they can continue paying a lower monthly mortgage. 

Q: Why should you have a pre-approved house loan?

A: It might be practical to look for possible financing options first before you close a deal with your desired house because if you compare in-house financing to a bank loan, bank loans usually offer lower monthly mortgage payments. Developers like Ayala Land include credit checks when you apply for a house purchase because they already enter your account into a pre-approved loan. That way, you will not have to worry about securing a loan after the downpayment period.

Purchasing a home is usually a significant choice. You’ve likely asked yourself countless times if a house loan is a perfect choice for you. These are reasonable inquiries, particularly if owning a home has long been on your bucket list, but you do not have the means to make it happen yet.

Even if you have saved up enough to afford the downpayment for your dream home, there are more things to consider. When you buy a house, the payment terms are among the most important things you should consider. 

Pag-IBIG or Bank Loan: Which Is the Better Housing Loan?

Woman's hand holding a coin

Whether a condo or a house and lot are being purchased here in the Philippines, the most popular method is to either obtain financing from the Home Development Mutual Fund (Pag-IBIG) or a private lender like a bank.

Home loans differ from one another in the same way that no two properties are exactly the same. It’s crucial to be aware of the distinctions to obtain the best conditions even when taking on a lot of debt, in addition to being successful in our applications for the financing we require.

One of the first things you need to know about a Pag-IBIG Housing Loan is that it is administered by a government organization, whereas a bank housing loan is provided by a private bank like BPI, BDO, Security Bank, and others. Both of its goals are to assist housing loan borrowers in creating and funding their dream homes. 

Let’s compare and contrast these two to better assist you in selecting the ideal loan.

Requirements

Some of the noticeable differences between a Pag-IBIG loan and a bank loan are the requirements. Here are some of the key differences between the requirements of a Pag-IBIG loan and a bank loan:

Pag-IBIG: Borrower must have been a Pag-IBIG member for at least 24 months

Bank: You must be between 21 and 65 years old to be a borrower

 

Pag-IBIG: Must have made at least 24 consecutive Pag-IBIG monthly payments (this can be paid in a lump sum equal to the 24 monthly payments)

Bank: Been employed by your current employer for at least two (2) years

 

Pag-IBIG: You must be 65 years old or younger at the time of loan application and 70 years old or younger when the loan matures

Bank: If operating a business or engaging in a profession, have at least three (3) years of profitable operation

 

Pag-IBIG: You don’t currently owe any past due loans and do not currently hold any Pag-IBIG loans that have been canceled, foreclosed on, or purchased back. You must be able to legally purchase and encumber real estate.

Bank: You must also meet the lending bank’s minimum monthly gross income requirement (which commonly ranges between P30,000 to P40,000 per month.)

Keep in mind that qualifications for bank loans may vary depending on the bank. 

Loan Approval

The main benefit of Pag-IBIG loans is that they have less strict eligibility standards than bank loans, making practically anyone who is an active Pag-IBIG member eligible. Pag-IBIG loan approval is all but guaranteed if you make monthly contributions, are under 60 years old, and don’t have any other outstanding debt, including home loans.

Loan Amount

While bank loans are the more sensible option for buyers interested in more expensive properties for sale, Pag-IBIG loans are more tolerant of low-income borrowers. Banks such as RCBC, BDO, and AUB, can pay up to 80% of the total cost of a property, regardless of how high that price may be.

In contrast, Pag IBIG’s Home Financing Program has a current cap of PhP 6 million. Although it must be emphasized that you do not need to be a depositor or member of a private bank to apply for the housing loans they offer, banks are more strict because of the higher loan amounts.

If you are a first-time property buyer or have a tight budget, a Pag-IBIG loan will be more suitable. A bank loan might be the right housing loan for you if you want to buy more expensive property. 

Different Housing Loans Offered in the Philippines

Hand holding a scale model of a house

Housing Loans by Different Government Agencies

To aid Filipino citizens in buying their dream homes, various government agencies have offered different housing loans. Here are the different housing loans offered by SSS, GSIS, Pag-IBIG, NHMFC, and SHFC:

Social Security System (SSS) Housing Loan

To help working Filipinos with housing costs, home loan assumptions, and house repairs, the government unveiled the Social Security System (SSS) Housing Loan Program. An SSS Housing Loan is given out by the Social Security System, a government-run social insurance program. SSS housing loans have many benefits despite not being as common as Pag-IBIG housing loans.

You can use an SSS Housing Loan to buy a lot on which to build a new home, to buy an existing residential property such as a house and lot, condominium, or townhouse, or to build a new home on a lien-free, free-and-clear lot that you already own. SSS offers four types of loans: Direct Housing Loan Facility for Workers’ Organization Members, Direct Housing Loan Facility for OFWs, House Repair/Improvement Loan, and Assumption of Mortgage.

SSS Direct Housing Loan Facility for Workers’ Organization Members

The Direct Housing Loan Facility for Employees’ Organization Members (WOMs) intends to offer workers who are genuine members of properly registered and authorized workers’ organizations socialized and affordable housing.

Any association of private sector employees that have been properly registered with the DOLE, the Securities and Exchange Commission, or the Cooperative Development Authority is referred to as a WOM. As outlined in Book V of the Labor Code, it shall include any trade union center, federation, national union, local/chapter, or independent organization.

SSS Direct Housing Loan Facility for OFWs

An OFW is a member of the private sector who is:

  • presently deployed under a contract handled by the POEA or authenticated by an overseas embassy. However, the loan must be released after employment contracts that are pending renewal or deployment are renewed or settled.
  • a Filipino native who was born in the Philippines but is now a resident or citizen of another country and wants to purchase a home for his family who is still in the nation.
  • a long-term overseas Filipino resident who wants to take advantage of housing packages for their extended family, for themselves, when they retire, or when they visit the Philippines.
SSS Housing Loan for Repairs and/or Improvements Loan

The Social Security System’s (SSS) Housing Loan for Repairs and/or Improvements is a lending program that can be accessed directly through the SSS or through its certified partner financial institutions (PFIs).

SSS Assumption of Mortgage Loan

The Social Security System’s (SSS) Assumption of Mortgage Program, more commonly known as pasalo (assume balance), enables a member in good standing to take over the updated principal balance of an existing SSS home loan.

GSIS Housing Loan

Existing housing account buyers or borrowers have the chance to bring their housing accounts up to date through the Ginhawa for All Housing Account Restructuring and Condonation Program. Due to the waiving of penalties and partial interest reduction, it encourages full payment, thereby lowering the sum owed on housing bills. GSIS also offers a rent-to-own scheme for foreclosed properties from the now phased-out GSIS housing loan program. 

Pag-IBIG Housing Loan

Pag-IBIG, formerly known as the Home Development Mutual Fund, is a government-controlled organization with the mission of helping Filipinos, particularly low-income and middle-income families, find affordable housing. The lower and middle classes can now own their dream homes thanks to Pag-housing IBIG’s loans, including rent-to-own homes. These loans have low and inexpensive interest rates. The property seeker must first be a Pag-IBIG member with at least 24 months of contribution in order to be eligible for the organization’s programs. Pag-IBIG payments are typically included in the list of obligatory perks that employers must provide to their staff. There is a voluntary donation option available to self-employed people.

The maximum loan amount Pag-IBIG offers is PhP 6,000,000, while for property buyers earning a minimum salary, it is PhP 750,000. If you want a more expensive property, you can opt for internal financing first and then apply for a Pag-IBIG loan when the outstanding sum reaches PhP 6,000,000.

National Home Mortgage Finance Corporation (NHMFC) Housing Loans

In order to increase the supply of loans for affordable housing, the National Home Mortgage Finance Corporation (NHMFC) was established. The NHMFC caters to the secondary market that operates or finances home mortgages, unlike SSS or Pag-IBIG Fund.

NHMFC only offers one loan product, the Housing Loan Receivables Program (HLRPP). The focus of this is more on the financial industry, developers, local government units, cooperatives, and other private sectors. Through the sale of NHMFC-acquired assets, they have developed a mechanism to assist these organizations in lending more money to prospective homeowners.

Along with this, the HLRPP also aims to assist these institutions in creating more affordable housing loans with lower interest rates and better managing their investment risk profiles in order to eventually extend repayment options for borrowers like you.

Social Housing Finance Corporation (SHFC) Housing Loans

The National Home Mortgage Finance Corporation’s (NHMFC) transfer of loan programs gave rise to the Social Housing Finance Corporation (SHFC). The SHFC focuses on giving low-income households and unauthorized settlers housing loans and finance. Similar to the NHMFC, the SHFC assists persons with lower incomes in obtaining their own homes by collaborating with secondary markets like LGUs engaged in housing developments.

These recipients have four possibilities for receiving financing or house ownership supported by SHFC:

  • Community Mortgage Program (CMP) – Through the CMP, legally constituted Informal Settlers (ISF) in economically struggling areas can get assistance financing their homes. In general, this program aims to provide ISFs with the means to financially enable them to improve their area. They could someday become homeowners thanks to this.Beneficiaries must establish and register a Community Association in order to be eligible for the CMP, which cannot be applied for by a single individual. However, how does each beneficiary obtain ownership rights to their home or land? By way of a Lease Purchase Agreement (LPA) with the Community Association, it is conceivable.
  • Abot Kaya Pabahay Fund-Development Loan Program (AKPF-DLP) – The AKPF-DLP can assist low-income urban city dwellers by providing financing for the construction of homes or other structures. However, these aforementioned residences must be a part of a certain housing project or the community mortgage program (CMP). This is more aimed at businesses or local government units that collaborate with the creators of social housing projects.
  • Localized Community Mortgage Program (LCMP) – The LCMP collaborates closely with LGUs. Members of the LGU who wish to purchase land that is largely mortgaged to SHFC are eligible for this community mortgage program. If the aforementioned city or municipality meets the requirements, SHFC will accredit them as partner LGUs. After this is granted, customers who meet the requirements can essentially choose from one of the following three purchase financing options.
  • High-Density Housing Program (HDH) – Because SHFC has consistently participated in the ISF Housing Program, the government gave them a P50 billion grant that will be distributed over five years. Therefore, the High-Density Housing Program was established by the SHFC (HDH). Their main objective is to give ISFs living in the National Capital Region safe, flood-free housing (NCR).

Applying for a Pag-IBIG Housing Loan

Businessman signing contract behind a house scale model

 

Here is a step-by-step guide on how you can apply for a housing loan thru Pag-IBIG:

  1. Complete the following requirements: 
    1. Valid IDs
    2. Updated Tax Declaration and Tax Receipt
    3. Vicinity Map of Property
    4. Housing Loan Application
    5. Proof of Income
    6. Additional Requirement by Loan Purpose
  2. Submit the required documents to the designated Pag-IBIG business center or branch. 
  3. Receive the Letter of Guaranty (LOG) and Notice of Approval (NOA). When the Pag-IBIG officer finds your application complete and in order, you will receive the LOG and NOA, which you will claim in the Pag-IBIG branch where you submitted your application. 
  4. Complete the additional requirements stated in the NOA. Pag-IBIG usually provides additional requirements such as mortgage annotation and transfer of title, which shall be completed after 90 days. 
  5. Receive the Pag-IBIG housing loan proceeds. The loan proceeds will be released after 10 working days from the date of submission of your post-approval requirements. Pag-IBIG will notify you regarding the safe and convenient release of the proceeds. 
  6. Pay your loan exactly a month after it was released. You can pay using Pag-IBIG’s accredited collecting partners and virtual Pag-IBIG. When paying the loan, do not forget your 12-digit permanent housing loan number. 

Applying for an SSS Housing Loan

Applying for SSS Housing loan

SSS has different types of housing loans to cater to the varying needs of homeowners. House Repair/Improvement Loan and Assumption of Mortgage have the same requirements as the direct housing loan facilities for OFWs. Here is a step-by-step guide on how you can apply for an SSS housing loan:

Direct Housing Loan Facility for Workers’ Organization Members

The member may submit the application to the Housing and Business Loans Department, located on the fifth floor of the SSS Building on East Avenue in Diliman, Quezon City, or to the closest SSS cluster branch.

The following paperwork must be presented with the application:

  1. Original copy of the following:
    1. Certificate of Loan Eligibility – (P100 Service Fee)
    2. Mortgagor’s Application for Housing Loan with 1″ x 1″ ID pictures of Principal Applicant and Spouse
    3. Certification of Membership from the workers’ organization
    4. Employer’s Certification
    5. Latest two (2) months’ pay slip is duly certified by the employer.
    6. Confirmation of Completion and Appraisal from Home Guaranty Corporation accredited appraisal companies
    7. Deed of Sale or Contract to Sell with Statement of latest balance (for purchase of lot or house and lot)
  2. Original and Photocopy of the following:
    1. Owner’s copy of the Original/Transfer Certificate of Title/Condominium Certificate of Title
    2. Latest income tax return, together with Form W-2 and Confirmation Receipt of Payment
  3. Certificate of Acceptance and Occupancy duly signed by the borrower if the house is 100% complete at the time of the loan filing
  4. Latest Property Tax Declaration and latest Realty Tax Receipt
  5. Other documents:
    1. Lot Plan with Vicinity Map duly signed and sealed by a registered Surveyor or Geodetic Engineer (Blue Print)
    2. Building plans/specifications/picture of the house (Blue Print)
    3. A set of twelve (12) postdated checks covering twelve (12) monthly installments shall be repeated every twelve (12) months thereafter until the loan is fully paid
    4. Tax Mapping/Subdivision Plan

Direct Housing Loan Facility for OFWs

The member may submit the application to the Housing and Business Loans Department, located on the fifth floor of the SSS Building on East Avenue in Diliman, Quezon City, or to the closest SSS cluster branch.

The following paperwork must be presented with the application:

  1. Original copy of the following:
    1. Certificate of Loan Eligibility (CLE) – (P100 Service Fee)
    2. Mortgagor’s Application for Housing Loan with 1″ x 1″ ID pictures of Principal Applicant and Spouse
    3. Certification from POEA/DOLE/OWWA/ SSS Foreign Representative Office or Philippine Embassy/Consular Office
    4. Appraisal Report from Home Guaranty Corporation accredited appraisal companies
    5. Deed of Sale or Contract to Sell with the statement of latest balance for purchase of lot or house and lot
    6. Certificate of Acceptance and Occupancy duly signed by the borrower if the house is 100% complete at the time of loan filing
  2. Duly notarized Special Power of Attorney (if filing is through a representative)
  3. Owner’s copy of the TCT/OCT/CCT
  4. Latest Contract of Employment and latest Employer’s Certification duly authenticated by Phil. Consulate
  5. Certified true copy of TCT/OCT/CCT issued by the Register of Deeds
  6. Latest Property Tax Declaration and Realty Tax Receipt
  7. Other documents:
    1. Building plans/specifications/picture of the house (Blue Print)
    2. Lot plan with vicinity map duly signed and sealed by Registered Surveyor or Geodetic Engineer (Blue Print)
    3. Tax Mapping/Subdivision Plan
    4. A set of twelve (12) postdated checks covering twelve (12) monthly installments shall be repeated every twelve (12) months thereafter until the loan is fully paid
    5. Affidavit of Undertaking to continue paying monthly SSS premium contributions for the duration of the housing loan

Note:

  • Display the original and provide one (1) photocopy for verification.
  • Subject to SSS verification, the applicant and any spouse (if any) must be current on any loans held with the SSS.
  • SSS retains the ability to request more paperwork if it thinks it’s required.
  • The first loan release will be reduced by the application fee, which will be deducted as 1/2 of 1% of the loan amount or P500, whichever is larger but not to exceed P3,000.
  • P500 is the inspection fee for both inside and outside of Metro Manila.

What You Need to Know About GSIS Housing Loans

GSIS Housing loan

The Government Service Insurance System (GSIS), established by Commonwealth Act No. 186 in 1936 and later updated by Republic Act No. 8291 in 1997, is a social security program for persons employed by the government and in the public sector (such as police officers, members of the armed forces, and others). The primary purpose of this organization is to provide members with insurance against specific unforeseen events in exchange for a monthly fee.

One of the most important updates regarding GSIS housing loans is that as of 2022, the only housing program offered by GSIS is the Ginhawa for All Housing Account Restructuring and Condonation Program and the rent-to-own scheme for foreclosed properties. 

Benefits of Ginhawa for All Housing Account Restructuring and Condonation Program

  • Unpaid interest will be dispersed equally over the term rather than capitalized, making it simpler for borrowers and homebuyers to restructure or pay off their debts;
  • interest rates of as little as 6%;
  • the release from fines and further fees; and a prorated discount on accumulated interest for those choosing to pay in full;
  • reduced amortization by an up to 10-year payment term extension;
  • a grace period for accounts that have never been restructured but have arrears because the initial monthly amortization was sent later than expected.

Application Requirements for GSIS Housing Programs

  1. Successfully completed application form
  2. Valid identification
  • ID by PhylSys
  • Employee or Business ID
  • Driver’s License
  • PRC ID
  • Senior Citizen ID
  • SSS ID
  • Voter’s ID/COMELEC/registration form
  • Integrated Bar of the Philippines ID
  • NBI clearance
  • Weapons permit
  • ID AFPSLAI
  • PVAO ID
  • Beneficiary ID for AFP
  • BIR ID (TIN)
  • Pag-IBIG ID
  • Solo parent ID
  • PWD ID
  • 4Ps ID
  • Barangay ID
  • Philippine Postal ID
  1. Newest real estate tax declaration for the land and any improvements
  2. Real Estate Tax Exemption (Land and Building)
  3. Evidence of the buyer’s, borrower’s, and co-financial maker’s stability
  4. Newest paystub
  5. Employment authorization with compensation
  6. Supplementary income

House Loans Offered by Banks in the Philippines

Applying for housing loan via bank

Bank of the Philippine Islands (BPI)

A. Housing Loan Form

  • Form of Application completed in full
  • Two legitimate identification cards
  • If married, the application must be signed by both partners
  • A second application form is required if there is a co-borrower or co-mortgago

B. Income-related Documents

If employed locally (working within the Philippines):

  • a COE that details the employee’s position, pay, and term of service.
  • Income Tax Returns (ITRs) for the most recent two years

If Filipino Expat (Overseas Filipino Worker)

  • Authenticated by the Philippine Consulate is a contract or a certificate of employment (COE).
  • POEA confirms Crew Contract and Exit Pass (seaman)
  • Evidence of monthly payments
  • Special Power of Attorney authenticated by a notary public (BPI FSB Format)

If Self-Employed

  • Articles of incorporation and bylaws accompanied by a certificate of SEC registration
  • the past two years’ worth of audited financial statements
  • Registration DTI
  • Income Tax Return with the Last Two Years’ Statement of Assets and Liabilities (SAL)
  • List of Business References (at least three names and phone numbers for significant suppliers and customers)
  • Six months’ worth of bank statements

If a Doctor in Practice

  • Addresses and times for the clinic

If From Commission

  • Account statements or receipts (last six months reflecting commission income)

If from Rental or Properties

  • Rental/Lease Agreement (indicating name of tenants and rental amounts with complete addresses of properties being rented)
  • Image of the Title (TCT/CCT)

C. Additional Documents

  • Owner’s Duplicate Copy of TCT/CCT in Clear
  • Licensed Geodetic Engineer’s certified Lot Plan with Location and Vicinity Map

Banco De Oro (BDO) 

BDO provides funding assistance for different purposes, such as:

  • Purchasing a Condo Unit
  • Purchase of a Townhouse or a House and Lot
  • Acquisition of a vacant lot
  • Home Improvement / House Renovation
  • Building of a House
  • Refinancing or taking out a loan
  • Payment for Acquisition Costs

Here are additional features of the BDO housing loan:

  • Complete Financing: Spread out your mortgage fee payments and loan-related fees over the duration of your mortgage loan.
  • Integrated Insurance: You can pay the insurance premiums for a year of coverage in 12 equal monthly payments, interest-free, and billed each month along with your amortization. The insurance policy will automatically renew each year over the full loan period.

Security Bank

Eligibility:

  • Minimum age of 21 and a maximum age of 65 at the time the loan matures
  • Having a monthly income of P50,000 combined
  • Has worked for the same company for at least two years
  • Self-employed individuals must have run a lawful and successful business for the previous three years.

What if My Housing Loan Application Gets Rejected?

Loan application denied

It may be unpleasant if you recently asked for a loan and your application was rejected. But it’s not personal, and there could be a number of explanations for the denial.

Understanding why your housing loan application was rejected and how to make the necessary modifications to raise your chances of approval the next time are crucial for improving your chances of getting authorized.

Knowing the Reasons Why Your Loan Was Rejected

Credit and income issues are the two main reasons why lenders reject loan applications. However, in rare circumstances, additional elements might potentially influence the choice.

Credit

When you apply for a loan, lenders will primarily look at your credit history and credit score. Lenders may decide that you are a borrower who is too hazardous to approve at this time if they notice any big negative items on your credit report or other warning signs.

Negative factors that frequently result in the rejection of home loans from the bank include:

  • Bankruptcy
  • Foreclosure
  • Receivables accounts
  • Defaulted payments
  • High balances on credit cards
  • Recently too many credit inquiries
  • inadequate credit history

If your credit score is below the minimum required by the lender, you may also be rejected. Make sure you are aware of your credit ratings and shop around for loans that are appropriate for your credit range to avoid this from happening again.

You will receive what is known as an adverse action letter from the lender outlining the reasons why your loan application is denied.

If your loan application is rejected, you are legally entitled to a free copy of your credit report. Your rejection letter from the lender should include directions on how to get a free credit report from the bureau it utilized to reach its decision.

Income

Two problems are probably to blame if your lender rejects your loan application on the basis of your income. The first is that your income is below what the lender considers to be minimal. Unfortunately, most lenders don’t release this information, making it difficult to determine whether your salary is sufficient to secure loan approval.

The other explanation is that your debt-to-income ratio is too high. Divide your total monthly debt payments by your gross monthly income to arrive at this percentage. To ensure house loan approval, it is better to choose a property that fits your salary

Additional Grounds for Rejection

Although your income and credit are the two main things lenders take into account, they don’t tell the complete story. As a result, you can be turned down for additional reasons, such as your employment history, the stability of your housing, or cash flow or liquidity issues.

Take the reasons seriously, even if you don’t have much immediate influence over some of them, and don’t reapply until you’re in a better situation.

4 Simple Steps to Get Your Housing Loan Approved

Approved Mortgage loan application with house key and rubber stamp

Applying for a housing loan can be overwhelming, especially if you are planning to buy your dream property. If this is the case, there are plenty of ways to ensure that your housing loan will be approved. Here are four simple steps to ensure that your housing loan will get approved:

  1. Check if you are qualified. The primary requirement to be eligible for housing loans offered by banks is to be at least 21 years of age and not older than 65 years old during the loan maturity period. Bank loans also require applicants to be employed; self-employed is allowed. For Pag-IBIG, SSS, and GSIS housing loans, the primary requirement is at least 24 months of contribution.
  2. Eliminate Debts. To have a higher credit score, it would be better to ensure that all your debts are paid off. 
  3. Always see to it that your bills are paid on time. Bills such as internet connection and electric and water bill are oftentimes included in the background checking procedure of bank loan applications, which is why you mustn’t miss your bills’ due date.
  4. Make sure you have a steady income. Loaning is a big responsibility that requires years of financial burden. You must have a steady income of at least PhP 30,000 to qualify for a housing loan or that your salary is more than enough to cover all your monthly expenses. 

For more real estate tips and advice, view our previous journals here.

Photos from Deposit Photos

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