How to Apply for a Home Loan in the Philippines

If you’re considering buying a home in the Philippines, understanding the home loan process is crucial. This comprehensive guide will walk you through everything you need to know about applying for a home loan in the Philippines, from start to finish. Whether you’re purchasing a ready-for-occupancy (RFO) property, a pre-selling unit, or planning to construct your dream home, we’ve got you covered.

What is a Home Loan?

A home loan, also known as a mortgage, is a type of loan specifically for purchasing residential properties. This financial assistance can be used for different types of properties, including RFO houses and lots, condominiums, and even vacant lots.

Types of Home Loans

1. Home Loan for Purchase of Ready for Occupancy (RFO) Property
   An RFO property is a house and lot, condo, or lot that is ready for you to move into upon purchase.

2. Home Loan for Purchase of Pre-Selling Property
   Pre-selling properties are those still under development. They offer the advantage of lower prices and flexible payment terms. Pre-selling properties require the same documents as other home loans but don’t need an appraisal fee. The loanable amount for these properties can be higher, often up to 80-90% of the total contract price. Equity payments can be made in installments without interest, and the term depends on the development stage, ranging from 12 to 50 months.

3. Construction Loan
   If you already own a lot and wish to build a home according to your specifications, a construction loan is ideal. This type of loan finances the building process from start to finish. The bank will appraise the lot and require a bill of materials. Typically, you can borrow up to 80% of the bill of materials’ value and 70% of the lot’s appraised value. The loan amount is released in installments as the construction progresses.

4. Equity Loan
   An equity loan uses an existing property you own as collateral. It’s often quicker to process since the title is already in your name but has higher interest rates (3-5% more) compared to other types of home loans and can be used to purchase additional property or for business purposes.

Steps to Apply for a Home Loan

Step 1: Submission of Required Documents for Home Loan

You’ll need to submit various documents, including a filled-out home loan application form and, if applicable, a marriage certificate and income documents. You can coordinate with the Zeta Group Team for your application since we have contacts with various banks to expedite your application. 

Step 2: Property Appraisal

The bank appraiser will assess the property’s value. This appraisal helps determine how much the bank is willing to lend you. The bank will usually lend the borrower 70-80% of the appraised value. You can try to request for a higher loanable amount, subject to bank approval. 

Step 3: Appraisal Fee Payment

An appraisal fee, ranging from 5,000 to 10,000 pesos, is required. The exact amount varies depending on the bank.

Step 4: Loan Approval

Once your application is approved, you can borrow up to 80% of the appraised value for a house and lot, or 70% for a lot only or a condominium.

Step 5: Equity Payment

The difference between the selling price and the loanable amount is called the equity. Typically, the equity or down payment is around 30% to 40% of the total contract price. For example, if you’re buying a house worth 10 million pesos with an appraised value of 9 million pesos, your equity would be 3.8 million pesos, plus taxes and fees totaling approximately 4.8 million pesos. Borrowers will be unable to obtain a loan for the total contract price since the bank will require a down payment. However, the higher the appraisal, the higher the loan amount. This will in turn decrease your required down payment. 

Basic Requirements for a Home Loan

• Proof of Income: Payslips, income tax returns (ITR), or bank statements.
• Property Documents: Title, tax declaration, etc.
• Government-issued IDs
• Additional Requirements for Specific Loans:
  • Pre-selling Properties: Developer’s computation and reservation agreement, proof of equity payment.
  • Construction Loans: Bill of materials, construction timeline, and budget.
  • Equity Loans: Property valuation report, proof of ownership.

Submission Process

Basic Requirements

• IDs with three specimen signatures
• Marriage certificate (if married)
• Filled-out home loan application form

Income Documents

For locally employed or OFWs: Certificate of Employment (COE) or job contract, and the latest three-month payslip.

For business owners, professionals, or online workers: Income Tax Return (ITR) and financial statements for 2-3 years, and six months of bank statements.

Special Power of Attorney (SPA)

If you’re unable to sign documents personally, you’ll need an original SPA. For buyers based abroad, the SPA must be consularized or apostilled if executed outside the Philippines, or notarized if within the country.

Filipino Citizenship

While some banks allow non-dual citizens born in the Philippines to apply for home loans, this often comes with higher interest rates.

Factors Determining Loan Amount

The loan amount depends on factors such as your gross income, age, and the property’s value used as collateral. Typically, your monthly amortization should not exceed one-third of your gross income. A mortgage calculator can help estimate your maximum loanable amount, considering any existing loans.

Sample Calculation

For a gross monthly income of 100,000 pesos:

• Maximum monthly amortization: 33,000 pesos
• Maximum loanable amount: 3.8 million pesos for a 15-year term at 6.5% interest per annum

Bank Approval

Bank approval in the Philippines usually takes around 15 banking days but may extend to 2-3 weeks.

When to Apply for a Home Loan

For RFO properties or private listings, apply as soon as possible. For pre-selling properties, apply at least two months before your equity term ends. Early application ensures timely processing and avoids delays. The application process is mostly online, with original documents needing to be signed at the bank.

By following these steps and understanding the requirements, you can navigate the home loan application process in the Philippines with confidence.

Need more help with your home loan application process? You may contact us at Alex.Zeta@TWRGroup.PH or via Whatsapp +63 917 851 2752 for an updated inventory and price list.