by Venus Zoleta, on category "Government Services"
July 27, 2018
With interest rates ranging from 5.375% to 10% over repayment terms of up to 30 years, the Pag-IBIG housing loan is one of the more affordable and flexible home financing schemes in the Philippines.
No wonder that many Filipinos, who dream of buying a home, apply for a housing loan from the Pag-IBIG Fund. In 2017 alone, the government agency released about PHP 65 billion in housing loans to over 80,000 borrowers.
A Pag-IBIG housing loan application isn’t as easy as it sounds, though. Neither is getting an 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 loan-to-value ratio. To evaluate them, Pag-IBIG conducts background, employment, and credit checks.
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.
Qualified Pag-IBIG members can borrow up to PHP 6 million for financing a home. But that doesn’t mean you’ll be automatically approved for any amount you request below that limit. Pag-IBIG will verify if your finances can handle the monthly repayments on your loan.
Carefully plan the amount you’re going to borrow. Consider your financial situation and capacity to repay a loan. Can you afford to pay the principal and interest with your monthly income?
Find out how much you can realistically pay in monthly installments. It should not exceed 30% of your gross monthly income. If your gross pay is PHP 50,000 per month, your mortgage shouldn’t be more than PHP 15,000.
Pag-IBIG has a housing loan affordability calculator that computes how much you can borrow and pay in monthly amortization 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.
Read more: Using a Loan Calculator: What You Need to Know
Is your income insufficient or unstable to qualify for a loan? Having a co-borrower or co-maker with a regular employment and an excellent credit history will help you improve your chance of getting a Pag-IBIG housing loan approval.
Pag-IBIG allows two or three members (including the principal borrower) who are up to second-degree relatives to apply for a single housing loan. This means you can partner with your spouse, sibling, parent, in-law, or cousin whose income will be added to yours to better qualify for a Pag-IBIG housing loan.
However, be careful when asking someone to sign a loan with. 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.
Before you apply for a housing loan, save up enough money for the equity or down payment, which is at least 20% of a property’s value. You can pay a larger amount to lower your loan-to-value ratio, monthly mortgage, interest rate, and loan term, raising your chance of a Pag-IBIG housing loan approval.
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 pay.
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 those figures as well.
You might fall in love so much with a property’s beautiful design and prime location that you overlook its price relative to your income. Don’t get too blinded, lest you make that common homebuyers’ mistake.
Remember: your priority is to finance your new home through a Pag-IBIG housing loan. You won’t get a loan approval if you’re aiming to fund an expensive three-bedroom condo when you can actually afford a modest townhouse. 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.
If you’re earning PHP 15,000 or less per month, 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. For the first five months of 2018, more than 10,000 minimum-wage and low-income earners have already availed of this low-cost house financing scheme.
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. You can borrow up to PHP 450,000 under the AHP.
Your credit history will make a huge difference in your housing loan application. Any delinquency in your credit card and loan payments is a red flag to lenders. If you have a bad track record of repayments, 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. Simply present your valid ID to get a free copy once a year.
A few years back, Pag-IBIG used to require housing loan applicants to attend a loan counseling session. Although it’s no longer compulsory for borrowers, the government agency still conducts free seminars to orient anyone who’s interested in applying for a Pag-IBIG housing loan.
Make time to attend the Housing Loan Programs Orientation—it’s a great opportunity to learn everything about the Pag-IBIG housing loan straight from an insider. You can get an instant response to your questions and concerns.
Pag-IBIG holds the orientation seminars from 9 am to 11 am on certain Saturdays of the month. Here are the schedules and venues for 2018:
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.
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.
However, 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.