Building a home is one of the foremost goals of every Filipino family. Even single individuals who are wanting to have privacy and independence are seeking their own home. Owning a property such as a house, an apartment, a condominium, or a townhouse gives a feeling of security because shelter is considered one of the basic needs of man before he can ever fulfill his other needs.
Price hikes entail a lot of challenges to everyone because it means that their buying capacity is decreased considering that their wages or salaries are low compared to the price hikes that regularly happens. The capacity of every Filipino, especially those belonging to the average income earners, to acquire house and lot, is greatly affected. If you interview some of them they would tell you that they won’t be able to buy or build their house even in the next 30-50 years! This realization would then lead them to resort to housing loans because they could not afford to build or buy their homes if they are only depending on their monthly salary.
Because of these scenarios, most of us would consider applying for housing loans at rural banks, commercial banks, GSIS, Pag-IBIG, or other financial institutions.
But even if there are a lot of financial institutions that are offering housing loans, not every loan applicant is approved with it. Read through this article for some guidelines and tips on housing loan application and what to do if ever your loan is disapproved.
1. Ask why
Most financial institutions don’t give any written reasons why the loan is disapproved. They will just tell you that you did not qualify for the loan. If this happens to you, you should ask why. Set an appointment with the manager and discuss why was your loan disapproved. This is helpful for you so that you will know why your loan is disapproved and you will know what to do next time. At least this experience will teach you what to do and what to avoid the next time you will apply for a loan again.
Most often, the financial institution looks at the 5 Cs of credit which are Capacity of the applicant to pay the loan, Collateral or the property that you pledged to the lending institutions as a guarantee for the repayment of your loan, Capital or the available assets of the loan applicant, Character or reputation which the bank or any lending institution will investigate, and Condition or rules that govern the loan agreement and payment terms.
All these factors must be explained thoroughly so that you will know what to prepare and how to prepare them to increase the chances of getting approval.
2. Buy or build only the house that your income can afford
I have talked to several people who have applied for housing loans. They said that usually, your monthly amortization must not be larger than the 30% of your gross income. In Pag-IBIG, the policy says that your monthly amortization must not be bigger than 40% of your disposable net income. If you fail in these conditions, you may not be approved with the loan that you applied for.
Actually, to be able to have the capacity to pay your loan, the amount of your monthly amortization should not be larger than 20% of your gross income. Why? Because you still have to spend for your basic needs like food, medicine, education of your children and their needs as well.
To get a better chance of approval, just apply for an amount that is affordable for you to pay and be sure to pay it shorter than 20 or 30 years. The shorter time to pay, the better. This is to save you from paying lingering interests.
3. Increase your cash out or down payment
Usually, when you apply for a housing loan, the bank or Pag-IBIG asks for a cash out or down payment, which is 20% of the total amount of the loan you are applying for. For example, if you applied for 1 million pesos loan, 20% of that amount is 200,000. That means that you should be able to give this to the bank or any lending institution where you applied for.
Giving a cash out or down payment means that you are able to finance your housing loan. If you can give a higher amount, that means that you get a better chance of approval and it also decreases your monthly amortization.
4. Establish credit history
Financial institutions also check your background especially those that relate to your credit history. If you have made loans in other banks or you have existing credit cards, you must settle all your debts first before you will apply for the loan because some banks are so strict and they will not consider your application if they will find out that you still have existing unpaid loans and overdue credits with other lending institutions.
They also look into your employment history. Sticking into one employment under one agency is much better than having many jobs at different agencies. This is a bad signal for them.
5. Get a co-borrower, co-maker o co-signer
To increase your chances of getting approved, get a co-maker or co-borrower. The need for a co-maker supports your application. It may even increase your credibility because the financial institution is not only going to look into your credibility but will also check your co-maker’s credibility. If your co-maker has a higher salary, that is even better.
Your co-maker also needs to pass the 5Cs of credit. There is a great responsibility of a co-maker,though, because it means that he or she should take part in paying your loan and if in case there is an accident that happens to you as the principal borrower, the co-maker needs to take over paying all your loans.
6. Weigh your options
Visit different banks and other financial institutions and study their terms and conditions carefully. From my survey, Pag-IBIG gives the lowest interest rate, but you may try other financing institutions, as well. GSIS also offers a housing loan. But this is only for government employees.
If you get disapproved, don’t despair. It is not only you who experienced it. There are many out there who had the same experience. Just think of it as a learning experience that taught you and prepared you to be better next time. There will be more options and opportunities for you. Take it slowly. Don’t rush. Things get better if you give them a chance to weigh them and think over. Be positive!
Reference: Vince Rapisura
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