The know-hows of home loans

To ensure a smoother application process, prepare documents such as proof of income, tax returns, and property details. (HTTPS://WWW.MESHIQ.COM)

Thorough preparation is key and a giant step towards your dream property

Homeownership starts with a purpose and a dream. With the right information and tools, you can pursue your dream house with confidence. Here are the essential know-hows to get you started on your homeownership journey.

What is a home loan?

A home loan is a type of financing granted by lenders to borrowers who wish to use the funds for their home loan needs. A housing loan provider can be a bank, independent loan agency, or Pag-IBIG Fund. Depending on your preferred type of property investment, a home loan offers flexible solutions to provide you with immediate capital to get you started.

There are a lot of benefits to a house loan. For one, most acquired home loans offer a low interest rate compared to other forms of financing. This can help you pay monthly amortization.

Another benefit is flexible repayment options. Many lenders allow you to choose the length of the repayment method. The best way around this is to choose how much you can afford to repay monthly. With a higher downpayment, you can often expect lower loan amortization. The shorter the loan term, the better.

What documents to prepare

To ensure a smoother application process, prepare documents such as proof of income, tax returns, employment verification, and property details.

Other documents that lenders typically require include accomplished application forms; valid IDs; marriage certificate, if applicable; application form for co-borrower, if applicable; bank statement for the last three months and other bank documents; and authorization to conduct a background check, among others.

Make sure to check with your chosen lender for any other documents they require.

How to get approved

Borrowers must meet their chosen lender’s minimum requirements. Usually, lenders require applicants to be at least 21 years old at the time of their application. They must also meet the gross monthly income requirement. Additional criteria may include a good credit history and proof of citizenship.

As any type of loan is a huge undertaking, you should avoid going above and beyond your capacity. You have to evaluate if you can afford the property you wish to own.

You need to ensure a steady source of income, and enough funds for the downpayment and processing fees. Banks are cautious when screening applicants. The ones who get approved are those who can prove they can pay their downpayment and monthly amortization.

Other costs and sample computation

Remember that you are not only covering monthly amortization but other charges and fees as well. These may include appraisal fees, title investigation fees, registration fees, notarial fees, handling fees, and fees for mortgage redemption and property insurance.

Still deciding? Use home loan calculators. Using Metrobank’s home loan calculator as an example, a borrower earning a gross monthly income of P40,000 wishing to loan an amount of P500,000 for a five-year loan term with a five-year interest fixing period would need to pay an estimated monthly amortization of P10,198.13 for a total loanable amount of P588,343.40.