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I used to be an employee of a Bank for 5 years handling Real Estate Loans or more particularly Housing Loans. I am well aware of the processing that takes place in applying a Housing Loan from start to finish.
There are a lot of things to know when applying for a loan, not just knowing the interest rate or the requirements, but determining if you are qualified or not. They say applying for a housing loan is difficult because a lot of requirements are needed and may take some time to comply in order for an applicant to get approved, and because of this time and money are wasted.
In order to avoid this kind of situation, here are some information you need to know when applying for a housing loan.
WHO ARE ELIGIBLE TO APPLY FOR A LOAN?
WHAT KIND OF PROPERTY IS ACCEPTABLE AS COLLATERAL?
All Real Estate Properties should be classified as RESIDENTIAL as per Tax Declaration and Actual Use.
HOW DO BANK’S DETERMINE THE LOANABLE AMOUNT?
WHAT IS THE PURPOSE OF THE LOAN?
1. For Purchase of a Residential Property
- House and Lot
2. For Renovation
3. For Refinancing or Loan Take-Out from other Banks
4. For Equity or Personal Use
WHAT IS THE BASIS FOR APPROVAL?
Banks evaluate their clients based on the Five Cs of Credit.
ARE THERE FEES & CHARGES TO BE PAID?
Yes. Since the Property is offered as Collateral, Banks will have to register to its mortgage on the Title. These are paid only once except for the Insurance. Here are the Bank Charges:
Bank charges are estimated at 3% of the Loan Amount.
ARE THE INSURANCES PAID YEARLY?
Yes. The MRI and the Fire Insurance are paid yearly until loan maturity. Some Banks charge the MRI monthly together with the Amortization. Fire Insurance are only charge if the property has improvements.
IS FULL OR PARTIAL PAYMENT ALLOWED?
Yes. For Full Payment, the payment will be paid direct to the Outstanding Principal Balance and borrowers will not be charged for the interest of the remaining term. The Interest to be charged will be based on the last payment until the date of Full Payment.
As for Partial Payment, most Banks allow to be at least the equivalent of 6 months worth of amortization. For example, monthly amortization is Php10,000.00 so the minimum partial payment is Php60,000.00. But you have to clarify this with your Bank since Banks have different policies.
ARE THERE PRE-PAYMENT PENALTIES?
As per R.A. 7394 or the Consumer Act of the Philippines, ARTICLE 137. Right to Prepay - The person to whom credit is extended may prepay in full or in part, at any time without penalty, the unpaid balance of any consumer credit transaction.
But there are some Banks that charge Pre-Payment Penalties for Borrower’s who make a Full or Partial Payment to their Outstanding Balance.