Published: February 19, 2021 | Updated: February 22, 2021 | Posted by: Moneymax | Government Services
Owning a home is a milestone that many Filipinos will always be proud of. For some, it’s a sign of financial independence. For others, it’s a status symbol.
A lot of us consider this purchase a significant investment. A real estate property is expensive. Also, the acquisition process can be complicated. Successfully overcoming these grueling steps certainly feels like a victory.
But did you know that owning a home can be easier than you expect? This is possible through the Pag-IBIG housing loan. With interest rates for as low as 3% over repayment terms of up to 30 years, this loan from the Pag-IBIG Fund is one of the more affordable and flexible home financing schemes in the Philippines.
If you’re planning to apply for this loan, we’ve come up with a simple primer that covers the program’s basics, plus Pag-IBIG housing loan tips to increase your chances of getting approved.
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According to the Pag-IBIG Fund, the housing loan allows you to borrow up to PHP 6 million for any of the following purposes:
A Pag-IBIG housing loan application isn’t as easy as it sounds, though. Neither is getting approval for the loan. It will take so much of your time, energy, and even money to comply with all the eligibility and documentary requirements.
If you plan to finance your new home through Pag-IBIG, you have to understand its basis for making lending decisions. A Pag-IBIG housing loan approval, as well as the amount to be loaned, will depend on a borrower’s capacity to pay, requested loan amount, actual need, and the loan-to-value ratio. To evaluate them, Pag-IBIG conducts background, employment, and credit investigation.
According to Pag-IBIG Citizens Charter 2020, the processing of a housing loan application takes around 20 working days.
When you submit your complete Pag-IBIG housing loan requirements, your loan will be processed within 17 days. If Pag-IBIG approves your housing loan, it will release the loan proceeds three days after you submit the required post-approval documents.
Here are the other important things to do to increase your chance of getting approved for a Pag-IBIG housing loan.
Do you have an outstanding loan with Pag-IBIG? Any missed payment can ruin your chance of getting approved for a new loan. Specifically, Pag-IBIG declines housing loan applications from borrowers with unpaid multi-purpose loans or foreclosed/canceled housing loan accounts with the agency.
So check your existing Pag-IBIG loan accounts, if any, to know if you’ve missed a payment. Make sure to pay off any outstanding loan before you apply for a new housing loan with Pag-IBIG.
Thinking of quitting your job? Consider the impact of resignation on your Pag-IBIG housing loan application. Job hopping will only hurt your chance of getting approved for a housing loan—more so if you switch to a lower-paying job or a career with irregular income.
Pag-IBIG will check your employment history to assess if you’re financially stable enough to handle all your monthly mortgages. Your employment tenure proves your income stability. Ideally, you have a steady income source for at least two years. The longer you stay with your employer, the better. So you’re better off sticking with your current job if you’ll apply for a Pag-IBIG housing loan soon.
Not everyone is aware of the importance of their credit score until they actually need it. If this is a new concept to you, think of the credit score as a representation of your trustworthiness and responsibility when handling loans and other financial obligations
Any delinquency in your credit card and loan payments, as reflected on your credit report, is a red flag to lenders. If you have a bad track record of repayments and a low credit score, you’re less likely to get approved for any loan.
Review your credit report at least a year before applying for a Pag-IBIG housing loan. This will give you enough time to correct any errors and improve your credit score. You can access your credit report through the Credit Information Corporation or one of its accredited credit bureaus.
Qualified Pag-IBIG members can borrow up to PHP 6 million for financing a home. But that does not mean that you should go for it. After all, the agency will still evaluate if you are actually qualified for it. The same level of verification and evaluation will also apply even if you’re borrowing money that is less than PHP 6 million.
Carefully plan the amount you’re going to borrow. Be realistic. Consider your financial situation and capacity to repay a loan. Can you pay the principal and interest with your monthly income?
Find out how much monthly installment you can afford. It should not exceed 30% of your gross monthly income. If your gross monthly pay is PHP 50,000, your mortgage shouldn’t be more than PHP 15,000.
That way, you still have enough budget for essentials, daily expenses, savings, investments, and leisure.
Pag-IBIG has a housing loan affordability calculator that quickly computes how much you can borrow and pay in monthly amortization. The calculation is based on your income, your chosen loan term and fixed pricing period, and the estimated value of the property you want to buy. The Pag-IBIG housing loan calculator is also useful if you want to know the required gross monthly income for the amount you want to borrow.
If you can, pay a higher down payment on your Pag-IBIG housing loan. Why? Other than a stable income, making a huge down payment proves your financial stability. It’s also a win for you since you’ll be borrowing a lower amount from the Pag-IBIG Fund, which in turn may mean lower monthly amortizations.
Ideally, pay at least 20% of the property’s value. If you can pay more, much better. Now, if you’re determined to raise a higher down payment and are willing to delay your purchase, consider creating another stream of income, such as side gigs or a small business. If you have a windfall, such as an unexpected inheritance, commission, or bonus, use it to fund your down payment.
Your Certificate of Employment and Compensation (CEC) can make or break your Pag-IBIG housing loan application. This income document, which shows your gross monthly income and other monetary benefits, proves your capacity to repay your loan.
Your CEC must contain accurate and updated information. For instance, if you’ve recently got a raise, it should indicate your latest monthly salary. If you’re receiving de minimis benefits or non-taxable allowances, request your HR manager to include such details as well.
If your income is low, it’s hard to qualify for most home loans in the Philippines, even the regular Pag-IBIG housing loan.
But fortunately, you may qualify for Pag-IBIG’s Affordable Housing Loan Program (AHP) that caters to low-income and minimum-wage earners.
Filipinos with a monthly income of up to PHP 15,000 in Metro Manila and PHP 12,000 in the provinces may avail of the AHP. It has a 3% annual interest rate for the first five years of the loan term. Monthly amortization can go as low as PHP 2,445.30, and the maximum repayment term is 30 years. You can borrow up to PHP 750,000 under the AHP.
Ready to apply for a loan? You’ll need to prepare numerous documents for your application. So you won’t lose track of which documents you’ve already secured and those you still need to work on, create a checklist of all Pag-IBIG housing loan requirements and their corresponding status on a spreadsheet.
Also, compile your documents in one folder or envelope to ensure everything’s in place when you submit the housing loan requirements to Pag-IBIG.
Got your housing loan application rejected? It can be stressful, not to mention painful, but that doesn’t mean your dream of owning a home is entirely shattered.
It’s okay to feel sad for a while, but you’ll need to get back on track. Here’s another set of Pag-IBIG housing loan tips for dealing with a denied application.
If you’re not earning enough money, Pag-IBIG will not approve you for a housing loan. Don’t fret, as the agency allows you to apply with a co-maker or co-borrower with a good credit history and a stable source of income.
Pag-IBIG allows you to apply with a family member or two for a single home loan. However, only relatives up to the second degree will be accepted. This means you can apply with your spouse, parent, sibling, in-law, and even your cousin. Their income will be added to yours, so the application has a better chance of getting approved.
However, be careful when asking someone to co-sign a loan with you. Not everyone in the family will agree to be responsible for any unpaid debts you make. It’s best to get a co-borrower whom you’ll share the new home with and who’s genuinely willing to help you out.
While you’re scouting for a new home, you might have stumbled upon a house that’s not only beautiful but also convenient location-wise. The question is: can you actually pay the monthly amortization without any struggle
Be practical. If you want your application to be approved without any problem, buy a home that you can afford. Even if you purchase a property that doesn’t fit your idea of a dream home, you’ll sleep better at night knowing that you have a roof over your head and still can afford to pay your monthly amortizations.
Keep on exploring, and you will find thriving locations and communities with cheaper properties. If you’re not in a rush to move into a new home, consider buying a pre-selling property.
While the Pag-IBIG housing loan is the top-of-mind choice of Filipino homebuyers, it is not the only option. There are other ways to finance your dream home.
Bank financing is another viable way to borrow money for a home purchase. Home loans from banks offer competitive rates (mostly 5% to 6%). But like the Pag-IBIG Fund, banks have strict requirements and credit evaluations for borrowers.
The easiest way to finance a home is through in-house financing. Instead of going through a third-party lender, a homebuyer directly deals with the seller or property developer to avail of a home loan. The requirements are minimal, and the process is simple and straightforward. However, in-house financing has higher interest rates and shorter payment terms than other housing loan providers.
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Owning a real estate property can be elusive. But not anymore, especially because you have the Pag-IBIG Fund to back you up. The application can be complicated and demanding, but remember the benefits that you will reap in the end: a lower interest rate and convenient payment term.
If you want to fast-track your application process and get it approved easily, keep the above-mentioned Pag-IBIG housing loan tips in mind. You may also get in touch with Pag-IBIG personnel for other details, such as additional documentary requirements.
If you got rejected for a Pag-IBIG housing loan, don’t lose hope. There are other home financing options in the Philippines, such as housing loans from banks, that you can avail at competitive rates.
With a goal to help Filipinos lead healthier financial lives, Moneymax regularly publishes tips and tricks on personal finance and lifestyle, among many other topics. For more finance-related news and articles, follow Moneymax on Linkedin.