Tuesday, February 16, 2010

Getting a Home Loan

My husband and I started looking for houses and lots for sale since 2007. We toured almost all house for sale in Filinvest II, QC, marvelling at the new designs and the fresh smell and the beauty of these houses, but always deciding that they are too expensive for us. These houses range from 6M-12.5M. We also toured townhouses in UP Village, Don Antonio QC, BF Homes, among others. Our purpose of getting our own house is of course gaining our independence from our parents, establishing our home and family, and be near a school where our children can study in. As we were looking at a townhouse unit in BF Homes, QC where the School of the Holy Spirit of QC (my school from Prep to High School) is located, we chanced upon a townhouse for sale in Granwood Villas. To cut the story short, we were able to visit the unit on the same day, meet the owner and made an offer with the owner on the same night.

It was the first major investment my husband and I had since investing in stocks and it was the quickest investment we made. I was a bit cautious and hesitant to buy real estate because I am seriously afraid of big monthly mortgage payments. But the townhouse proved to be affordable in cost, maintained very well with insurance and pest control maintenance, among others. It was the answer to our prayer.

Now the hard work comes...negotiating with the Seller on the terms of payment. Since our Seller is based abroad, we had to coordinate our sale and loan transactions with the Seller's schedule. Then, we had to research on the different home loans available in the market.

We learned that there are several home loan programs available today (i.e. Chinabank, BDO, BPI, PSBank, etc.). Based on several telephone inquiries we made, these banks offer more or less the same indicative interest rates, require the same documents and have a similar timetable from processing your home loan to title transfer and release of check to your real estate Seller. Can you believe that it takes roughly 3 months from the time you apply for a home loan until the time the bank will issue the loan check to your real estate seller? Whew.

Most importantly, you have to pay at least 20% of the value of the real estate to your seller in order to execute a contract to sell which is needed in most banks as part of your loan application. Because a maximum of 80% of the assessed value of the real estate can be loaned from the bank.

When you submit the documents, it takes a maximum of 3-4 weeks in order for them to approve the loan, and issue a "Letter of Guaranty" that the money is already available with the bank. However, before you can get the loan, you need to transfer the title from the seller's name to your name, which takes approx. 1 month because you need to go to BIR (to pay the capital gains tax which we shouldered based on our negotiation with the seller, which is 6% of the value of the real estate, documentary stamps, etc.) and to LRA after to register the title under your name. At present, both government agencies are computerizing their system, thus, the delay in getting your title. And then, another 3 weeks for the bank to verify the title before the issuance of the check. whew again!

If your Seller would like to get the remaining balance before the 3 months waiting time for the bank loan, one strategy is to come up with the money first by getting them from family members and then reimbursing them once the bank loan check is issued. But this is an entirely new ballgame. And of course its hard to borrow from family members given the big amount involved.

Anyway, here's a sample timeline of the processing of loan, title transfer and release of check for your reference:

Week 0: Submission of Loan Application
Week 1-3: Loan Approval Period
Week 4: Loan Approval Period, Buyer- Signing of Promissory Note, payment of loan and transfer fees, Bank issuance of Letter of Guaranty to the Seller
Week 5-6: Seller and Buyer -signing of Deed of Absolute Sale, Seller signing of the Bank Guaranty, with undertaking to submit to Bank a copy of the title transferred in the name of Buyer
Week 7-10: Transfer of Title to Buyer's name
Week 11: Seller or Buyer in behalf of Seller submit copy of title to Bank, Seller or Buyer in behalf of seller submit copy of tax declaration issued in the name of the Buyer, Seller or Buyer in behalf of Seller to submit real estate receipts and tax clearance
Week 12-14: Bank verification of title in Buyer's name, registration of mortgage, Issuance of loan check to Seller.

Said timeline may be quicker or maybe delayed depending on the particular bank's loan procedures and how fast you can facilitate each procedure.

For indicative interest rates, you may visit the following banks' websites and call their Housing Loan Department:

Chinabank Homes Plus Loan
BDO Asenso Kabayan Home Loans
PSbank Home Loan
BPI Build Your Dream Housing Loan

If you would opt to have the Pagibig Housing Loan, their Pagibig Fund End User Home Financing Program Guideline can be found in their website. The interest rate depends on the loanable amount, and is subject to repricing if the loanable amount is more than P400,000.00.

Loan Amount Interest Rate
Up to P400,000 6%
Over P400,000 - P750,000 7%
Over P750,000 - P1,000,000 8.5%
Over P1,000,000-P1,250,000 9.5%
Over P1,250,000-P2,000,000 10.5%
Over P2,000,000-P3,000,000 11.5%

Source: Pagibig Fund End User Home Financing Program

At the end of the day, it's best to review the interest rates and what the particular bank has to offer that meets your needs. Goodluck on finding the right home loan for your and your family!

Disclaimer: This post is for information purposes only. It contains links to other websites of interest. Although information has been obtained from and is based upon sources/websites Wondermom believes to be reliable, Wondermom doesn't guarantee its accuracy, and it may be incomplete or condensed. Also, Wondermom is in no way affiliated with any contact persons indicated in said websites and is not endorsing any housing loan program in exchange of personal gain/transaction. Please directly contact the responsible parties for further information on housing loans.