3 factors to consider when acquiring a housing loan
By Mike Aquino for Yahoo! Southeast Asia
The “welcome to our humble home” foot rug in front of Buddy Alejo’s condo door looks brand new. That’s because it is: Buddy and his wife just moved into their new condo, just a couple of years after applying for a housing loan at their long-time BPI branch.
“In retrospect, it was great timing,” muses Buddy. “After my promotion as sales manager, I thought it was a sign I should find a home close to work.” Living with the in-laws, while not unpleasant, was also a factor: “We had the means to find a place of our own, so why not take advantage?”
Making the transition from staying with the parents to becoming homeowners wasn’t a sure thing—a few things had to fall into place before Buddy and his wife could put out the welcome rug on their own home:
Steady income. If you’re like Buddy—a sales manager for a medical supplies company, employed since the early 2000s in a well-paying job that earns a significant income—you’re well on your way. Banks feel more comfortable lending to individuals with high, stable salaries.
BPI Direct, for instance, prefers applicants who have been employed for at least two years, with a minimum gross monthly income of P50,000 or higher. Why the two-year minimum? Stability is a high priority for lenders—it means less risk.
Good credit. You should have a record of being a good borrower: lenders want to know you won’t default on your loan, leaving them holding the bag with the property. Buddy’s record with his home branch held him in good stead.
If you have no record, or if your record shows that you haven’t been able to meet your credit card or other obligations, banks may either charge you a higher interest, or deny you outright.
Lenders may check with the Bankers Association of the Philippines-Credit Bureau (BAP-CB) if you have a record; in case you haven’t been able to meet your credit obligations, the Bureau’s Negative File
Information System (NFIS) will let them know. That doesn’t mean you get blacklisted on the first missed credit card payment: “Even when the credit card falls past due, it is not immediately placed on the list,” explains Leonilo “Topper” Coronel, BAP-CB Executive Director. “We make allowances for curable periods where a borrower might have merely forgotten to pay.”
Some companies will facilitate loans for their own qualified employees—for reasons pertaining to self-interest, of course. “Most companies, they help the employees get approval for a housing loan because it assures them that their employees will be good employees—these people will not resign,” explains Fitz Villafuerte, entrepreneur and personal finance blogger at “Ready to be Rich” (fitzvillafuerte.com).
No new debt. While you’re taking on a significant obligation, you should make sure you won’t be put on the hook for any new debt while you’re paying down the housing loan. You want to stay focused on paying the monthly amortization, without getting bogged down in more debt as you go along. For good measure, Buddy canceled his credit cards.
Chances are, the bank has already done its bit to limit the damage: Philippine banks generally do not permit loans that result in a monthly amortization of more than 30 percent of a lender’s monthly gross income. In any case, you should be in a position where your monthly amortizations do not represent a crushing burden on your budget.
In Villafuerte’s opinion, that means holding off till your income can handle the load. “If you’re a VP in a company, you’re earning P200,000 a month,” explains Fitz, “so getting a housing loan for which you’ll be paying PHP 30,000 a month, it’s just a small portion of your monthly salary.”
Not all of us can be like Buddy, with all the ducks lined up in a row. If none of these apply, says Fitz, put it off. “Ask yourself, ‘where are you going to get the money to pay that debt?’” queries Fitz. “If you don’t know where, then better not incur that debt in the first place. That’s the most basic thing that you have to ask yourself.”
