A home loan is a financial help provided by a Bank or a Financial Institution to help you in buying and/or modifying your property.
The basic needs of men are Food, Shelter and Clothing, among these 3 the most sought after need is to build a suitable shelter, this is where a Home Loan is considered.
In layman term, a home loan is simply borrowing money with interest for a specific period of time to buy or to renovate a house. A few years back, this definition was enough to define the meaning of home loan but today the competition between banks and their services changed the meaning of home loan completely.
Nowadays, home loans have a bigger scope and banks offer these loans even for small needs about your home. To understand this concept better, let us have a look at the different types of home loans available.
Home Purchase Loan
This is the basic type of home loan which is offered by every bank. Home purchase loans are meant for the people who are planning to buy a house or a condo. Most of the banks would usually offer about up toseventy or eighty percent of the appraised value of the house or condo in the form of a loan.
Home Construction Loan
Some people also consider building their own home according to their needs and specification. To reach this goal, you need first some money to buy a land, and then more money for all the construction costs (materials, manpower, architect, permits, …). For those people Home Construction Loan is the solution.
Note: If you are already the owner of a lot and want to build a property on it, this is also the kind of loan you need.
Home Improvement Loan
Do you own an ancestral house and want to renovate it but lack the fund? Then you don't have to worry as home improvement loan is the perfect solution for your problem. These are meant for persons like you only who already own a home but want to repair it.
Home Extension Loan
Home extension loans are given to those who want to build an extra space or another part of the house that needs redoing, maybe a part of the garden to be built as a new guest house or another room for a new family member.
Applying for a home loan can be complicated and frustrating because of all the paperwork involved, and sometimes it seems that everyone has a full understanding of what is going on, but you. The best solution before doing something is always to do a research, to be diligent about your project, and of course to look for the right loan officer that will help you understand everything there is to know about the product you wish to avail.
Before you begin looking for a Housing loan, first, become familiar with the different types of loans(see Types of Home Loan), rates and terminology. Read the local newspaper’s real estate section or read through this site for more information about Loans and how you can get them or hire a Financial broker that takes care of finding the right loan for you. Make a list of any questions you might have about the information you find. Prepare a monthly budget and determine what terms of payment you can comfortably afford. This will become your benchmark
Make a list of any questions you might have about the information you find or read on the details below. Prepare a monthly budget by calculating using our Income Calculator and determine what terms of payment you can comfortably afford. This will become your benchmark.
Topics you might find useful:
What is a Conventional Home Loan?
A Conventional Loan requires a borrower to make fixed monthly payments for a specific term or period. Philippine banks provide their clients home loans with a loan tenure of up to 20 years for a minimum of P500,000. This type of repayment scheme enables a borrower to properly manage his finances because the payments are predictable.
What is a Flexible Home Loan?
Flexi loans are conventional loans that are tied or linked to a current account. Borrowers can reduce their home loan interest every time they deposit cash to their current account. Excess payments can also be withdrawn anytime without giving the bank any notice. Borrowers can also start their principal repayment anytime they want.
The most important step you can take in the mortgage process is to find the right lender and loan officer. Having a broker (find out "Who we are") is the best way to get all the information for the best loans that fit your need. Brokers are also a good option for those people who don’t have the time to go through loan related procedures. It is the loan officer's job to help you and your documents smoothly through to loan approval. He should be knowledgeable, experienced, responsive and prompt, as well as willing to take the time to answer questions, explain the loan process, programs and terms. A personal recommendation is also useful, especially by family, colleagues and friends, or if not, make sure that make appointments with several different loan officers.
Prepare for your appointments by making copies of documents specifically required by each lender. You will need your Social Security number and driver’s license, the past two years of your wage and tax statements and one month’s pay slip to verify your income. If self-employed, you will need tax returns for the past two years. A bank statement for the past 3 months and statements for any accounts that hold your down payment money would also be needed. In addition, if you have any credit account or loan statements you pay on a monthly basis, and court-ordered payments such as alimony or child support those would also need to be known by the lender. The loan officer will also pull a credit report on you.
The loan officer will take all of your information and determine what kind of loan you are pre-qualified for based on the information you have on hand. A Good Faith Estimate and Truth in Lending statement are generated detailing the terms of the loan and the closing costs. This is the document you will use to compare loan offers. They should fairly meet your loan requirements, so go with the best deal from the loan officer and provider.
After you choose a loan officer and lender, your application will be submitted to the loan processor, who will compile the file, order the appraisal and gather any additional information and verification. The loan processor may ask the loan officer for additional information from you, which you need to supply promptly. When the file is finished and the appraisal is complete, it will give the file to the underwriter, who will decide if the loan is approved. After approval, all that is left is the closing, where you will sign all the loan documents and complete the property transfer. The process usually takes around 30 days.
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