Housing Loan Requirements: What You Need to Know

Most of us aspire to one day have our very own homes. For many people, purchasing a home can be a daunting task because it’s a huge financial commitment, and not everyone can afford to do it all at once. To help make this dream a reality, home loans have become a popular option. It can be a challenging path, but it’s not impossible. With several home loans available, anyone can secure their ideal home. But how does one apply for housing loans? What are the requirements, and how do you choose the right one?

Knowing what qualifications lenders seek when approving your housing loan is key. In this blog post, you'll learn all about common eligibility criteria across different home loan options. We’ll also lay down some factors that apply to qualifying for one.

What is a Home Loan?

Financial institutions like banks and mortgage lenders offer home loans, also known as mortgages, to help people buy homes. Since houses are typically expensive, many people cannot afford to pay for them outright. A home loan allows borrowers to borrow money to buy a house and then repay the loan over a specified period, usually through monthly payments.

Home loans make homeownership more affordable by spreading the cost over time. Before getting a home loan, potential homebuyers should consider their finances, the terms, and the cost of homeownership.

Why Apply for a Housing Loan?

Housing loans are designed for first-time homebuyers and homeowners looking to improve their property. Homeowners and would-be homeowners alike are interested in housing loans because of the following:

• Buying a Property

You might be interested in purchasing a condominium, a home and lot, or even just some land. If you’re looking to build your dream home, this property could be the perfect starting point.

• Refinancing an Existing Loan

You may have come across a financial product with better housing loan requirements and terms. With home refinancing, one creditor pays off the old one, and the borrower takes out a new loan with better terms from the new lender. 

• Utilizing Your Home’s Equity

Maybe you’re considering taking out a mortgage to pay for major purchases like medical bills, your kid's college tuition, or a major trip. Home equity loans allow you to borrow money by using the value of your property as collateral.

• Constructing a Home

The freedom to build a house on one's land is a major perk of property ownership. A home loan can be used to finance the building's construction and guarantee its completion. After that, you can use the loan to cover things like materials, labor, and permits.

• Enhancing Your Home

If you have a home that you're looking to update, securing a housing loan can provide the financial support needed for your renovation project. The loan can be used to fund home renovations, remodeling, and repairs.

For any of these reasons, this specific kind of loan stands out as the best option for financing your future house or any projects that will make your living space even better.

How Can I Qualify for a Home Loan?

The next step, after making sure a house loan is the best way to cover your property-related expenses, is to figure out if you qualify for one. 

To be eligible for a home loan, you must meet these minimum standards:

• If you're a resident of the Philippines, you should be between 21 and 65 years old
• If you’re an overseas Filipino worker (OFW), you must have the following:
  • a special power of attorney
  • a copy of your contract and a POEA-approved certificate of employment
• Foreign nationals residing in the Philippines are required to possess an Alien Certificate of Registration in addition to the appropriate visa requirements
• Other paperwork may be necessary to complete your loan application, depending on the financial institution you are applying to

Besides the minimum requirements for housing loan applications, you also need to further assess your capability to pay the loan. 

Unfortunately, not all home loan applications are approved by the lending institution. Housing loan providers, whether public or private, are in the business of making a profit, so they’re selective about the borrowers they extend credit to. So, before applying for one, ensure you’re capable of making payments by checking the following:

• Credit Background

Lenders, both public and private, will check your credit history to see whether you have a track record of paying back loans. By reviewing your credit card and other financial transactions, government or bank housing loan institutions will determine if you’re likely to repay your loans in full and according to the terms outlined in your agreement.

• Age

As mentioned earlier, the age requirement is the bare minimum. But it also limits how many years borrowers have to pay back the loan. For instance, if you’re 50 years old, you might not be eligible for a 20-year mortgage because you will be 70 years old when the loan is paid off. 

• Family Earnings

Your income level is a major factor in the approval or rejection of your home loan application. When you apply for a loan with your spouse, their income will also be taken into account. This information helps financial institutions assess a borrower's capacity to repay loans.

• Income Stability

The application of a person or couple demonstrating greater financial stability is more likely to be approved by financial institutions. Therefore, it’s recommended to remain with a company for a minimum of two years if you intend to apply for a home loan soon.

• Dependents

In some cases, paying for young children and elderly parents can be difficult for a person with many dependents. Home loan companies consider these and may offer more lenient terms if a borrower has to use loan funds for other expenses.

• Loan Amount

Your requested amount is also a crucial factor in your loan application status. It is important for borrowers to stay within the financial services provider's acceptable range when applying for amounts. The greater the loan amount, the more closely the lender will examine the borrower's ability to repay the loan in full.

What Are the Housing Loan Options Available?

There are several bank housing loans and government-led home loan programs that you can apply for once you meet the home loan requirements. Here are some options to consider:

• Pag-IBIG Housing Loan

Homebuying and home improvement loans are now more accessible than ever before, thanks to the Pag-IBIG Fund. Program members can secure loans of up to 6 million pesos, extending a helping hand to individuals eager to transform their living spaces. 

To be eligible for the program's housing and other loan offerings, individuals must adhere to the Pag-IBIG housing loan requirements:

• have maintained Pag-IBIG membership for at least 24 months
• no older than 65 years old when you apply for the loan, and no older than 70 years old when the loan is due
• maintain a perfect credit history free of any organization-related foreclosures, loan cancellations, returns, or surrenders
• have updated payments for any current Pag-IBIG Housing accounts or Short Term Loans (STLs)

Individuals can check their website for a complete list of the requirements and steps for housing loans in Pag-IBIG.

Looking into ways to use these benefits for future home projects is a wise decision for Pag-IBIG members. Many developers have worked with Pag-IBIG to offer aspiring homeowners more affordable and convenient housing options. So, use your Pag-IBIG membership to open doors for better financial options for your dream home.

• SSS Bank Housing Loan

Home loans are also available to overseas Filipino workers (OFWs) through the government's social insurance program, the Social Security System (SSS). Borrowers are given the opportunity to borrow up to 2 million pesos, which can be repaid in full over a maximum of 30 years.

Here are the requirements to be eligible for an SSS housing loan:

• the member is an authorized Overseas Filipino Worker
• the individual is an OFW who voluntarily joined SSS
• the member must have contributed for a minimum of 36 months and a minimum of 24 consecutive months before applying
• the applicant must be insurable and no older than 60 years old. The maximum loan term for members who are 60 years old when they apply is 5 years
• the member did not receive a housing loan from the SSS in the past
• the member has not yet received their final SSS benefits
• the repayment status of the borrower's and spouse's other Social Security loan(s), if any, is kept current
• spouses of current borrowers may be eligible for a second SSS home loan as long as the first borrower's loan was taken out before the marriage and is not in default

This can be a practical choice for your loved one who is working overseas and wants to begin constructing their dream home. To apply, thoroughly check their application steps after gathering the required documents.

• Bank Housing Loan

In addition, banks offer their customers a wide range of financial products that they can use to buy, build, or improve their households.

Bank home loan loans typically come with flexible terms, competitive interest rates, and long repayment periods. They also enable borrowers to obtain larger sums of capital that they would not have been able to obtain from other sources, such as personal savings or family members.

However, when compared to other types of lenders, banks typically employ a more stringent and demanding process. Banks require borrowers to submit a plethora of paperwork and patiently await the approval of their home loan applications. Loan amounts and conditions offered by different banks can differ substantially.

One good example of a retail bank offering home loan products is RCBC. This trusted retail bank can offer home loans for as low as P300,000, making owning a dream home within reach. To start, here are RCBC’s housing loan bank requirements:

For employed individuals, you must:

• be a Filipino citizen or dual citizen
• be married to a Filipino citizen if a foreign national
• be 21 or older to apply for a loan
• be no more than 65 years old when the loan is due
• maintain a landline at your residence or place of business in addition to your mobile number
• be employed for at least one year and have a gross monthly income of at least Php40,000
• have worked abroad for at least 2 consecutive years if an OFW

For self-employed individuals, you must:

• be a Filipino citizen or dual citizen
• be married to a Filipino citizen if a foreign national
• be at least 21 years old when applying for a loan
• be no more than 70 years old when the loan matures
• have mobile and home/office landlines
• have a business that’s profitable for 2 years

If you meet these criteria, you can apply by filling out the RCBC housing loan application form and submitting it along with the other required documents. Here are the required documents you need to gather:

• bill of materials for building, TCT, and tax declaration copies (land and improvement)
• employed applicants must provide:
  • Certificate of Employment (COE) or the most recent Individual Tax Return (ITR), 
  • two valid government-issued ID
  • a Taxpayer Identification Number (TIN)
  • a utility bill
• self-employed applicants must provide:
  • Business Registration with DTI
  • Audited Financial Statements
  • ITR or bank statements

Right now, you can find a wide variety of home loan products offered by trustworthy financial institutions, whether public or private. For more information about RCBC's home loan products, check out their frequently asked questions. 

Choosing the Right Home Loan Requires Careful Consideration

Your dream house is now possible with the help of home loans. Now that you have everything you need, including knowledge about housing loan requirements, you can compare home loans with precision and choose the one that is right for you. 

Remember, as you embark on this journey, it's crucial to weigh all your options meticulously, ensuring that the path you choose aligns seamlessly with your aspirations. So, before you start shopping around for a home loan, take stock of your current situation and make a list of all the features and requirements you need from the product. With this approach, you can make sure that buying a house goes off without difficulty.