Are you considering purchasing a house or condo anytime soon?

Well, you’re probably wondering what could be some of the ways to go about making this dream happen.

If you’re not making a purchase using cash, chances are you’re exploring bank financing.

Buying a house is one of the biggest investments you can make and it’s important to understand all of your options. In this post, we will take you through some of the basics of bank financing for buying real estate in the Philippines.

What is bank financing?

Bank financing is the practice of taking out a home loan from a bank that you use to purchase a property in the Philippines. This type of loan will allow you to pay for your home with interest, and it’s very similar to what most people are used to when financing their cars or other big purchases.

Home loans are typically secured by collateral, such as the property you are interested in purchasing, that are held by banks until they’re repaid in full.

How easy is it to get a home loan?

When you apply for a home loan, your lender will conduct an in-depth analysis of your financial situation and determine whether or not it can provide you with money at competitive rates. If approved, they will issue an approval letter outlining how much money they’re willing to lend based on their evaluation.

The eligibility requirements of bank financing vary per financial institution and per borrower. The good news is most banks have all the necessary information on their official websites about home loans for quick reference of a potential borrower. You may refer to the list of websites below:

PHILIPPINE BANKS HOUSING LOAN OVERVIEW

• Banco de Oro – Home Loan (BDO)
• Bank of the Philippines – Home Loan (BPI)
• Security Bank – Home Loan
• Union Bank – Home Loan
• Metrobank – Home Loan

How long does it take to get a loan approved?

Just like the varying eligibility requirements, there’s no fixed timeline for the drawdown of the loan. This would usually depend on each bank’s processing system while considering how much you have saved up for a down payment, how much you can afford to pay monthly, and other factors.

Also, do consider that the approval may be slowed down by other circumstances outside your control.

However, most banks endorse that the approval of their loan may take 10 days or less upon submission of complete documentary requirements.

Should we pay the down payment to the seller/owner?

One of the most common concerns of home loan applicants is what happens if they are not approved. Should they or should they not get the down payment back from the seller owner?

Well, it’s normal practice that sellers require a downpayment from buyers to secure the unit and grant the buyer access to the documents and to the property’s premises during home loan appraisal. This downpayment becomes a non-refundable deposit as security in case the sale does not push through for whatever reason.

Therefore as a buyer, what you might wish to do is to refrain from making a large downpayment. If your loan is not approved, this amount will no longer be refunded to you to cover the liquidated damages in favor of the seller.

Hence it’s advisable to take some precautionary steps by getting pre-assessed or pre-approved for bank financing in the Philippines by approaching the bank you’d like to apply for a loan.

Overview of the step-by-step process of bank financing

1. First, do your research. Visit some of the websites of your preferred banks and talk to them afterward about the bank financing process so you get to familiarize yourself with prevailing rates, timeline of loan drawdown, and documentary requirements. The bank will also assess your financial capability.
2. Armed with this knowledge, you can now begin to search for the property you want to buy. Be forthcoming to the listing brokers of the properties that you’re looking to purchase through bank financing so they can advise you if the property in question accepts this payment term. You can read more about our tips here on what to look out for when buying a property.
3. After you find the property and negotiate the final price with the seller or his representative, it’s time to make the earnest money payment together with the signing of the Contract to Sell between buyer and seller.
4. The property will then be subject to an appraisal as part of the housing loan application process.
5. Once you’re approved for a loan, the bank will issue a bank guarantee letter, which you will then remit to the seller along with your downpayment equivalent to the amount excess of the loan, simultaneous with the signing of the buyer and seller of the Deed of Absolute Sale. The bank guarantee letter can be considered good as cash by the owner for the balance payment.
6. The brokers/conveyance officers will now begin the process of the transfer to procure the new ownership documents (i.e. title and tax declaration) to the name of the buyer. Once completed, the new title and tax declaration will be given to the bank and they will annotate the loan. At that point, they will release the loan amount to the seller.

Note that this step-by-step is the typical procedure when the seller and buyer are individuals. Buying from real estate developers and corporate-owned properties may have different or additional steps required to complete the transaction.

Which bank approves loan faster?

Banks don’t approve home loans instantly as the approval depends on various verification processes. But we do know that the Philippines has seen an increase in the number of housing loans granted in 2023 by 16%, according to Bangko Sentral ng Pilipinas.

This means that more buyers are showing their capability to buy a property through home loan that could prompt the major banks to offer competitive rates and stream-lined processes, which could then make real estate loans more accessible.

Looking to buy a property? Browse homeshere

DISCLAIMER:  The information on this website is for general information only. We are not an attorney, accountant or financial advisor. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances.