Real Estate Finance

The Pag-IBIG Housing Loan Process

This can be filed as one of the frequently asked questions: “How can I apply for a Pag-IBIG Housing Loan?”

This article addresses that question in a very straight-forward and easy-to-understand manner.

So without further ado, here are the steps to take.

Step #1: Attend The Loan Orientation. Officially, it’s called Loan Counselling Session. It’s conducted at any Pag-IBIG Office all over the Philippines. Check your nearest Pag-IBIG Fund office to check their scheduled Loan Counselling Session.

Step #2: Fill Up Some Documents. Normally, you will be asked to accomplish the following documents:

Preliminary Counselling Questionnaire – Some basic questions that are easy to answer.
Membership Status Verification Slip (MSVS) – This will be used by the assigned staff to check your records and contributions to the Pag-IBIG Fund.
Housing Loan Application (HLA) – This is the official document where you signify your intention of getting a loan.

If you are qualified for a loan, you will be given the Checklist of Requirements (COR) depending on the purpose of your housing loan. Fill-up the HLA only after knowing your status. (Read Step 3)

Related: Are you qualified for a Pag-IBIG Housing Loan? Click here to find out.

Step #3: Submit HLA And Other Required Documents. This will probably take a couple of days to comply. But once all of the documents in the requirement checklist are ready, submit them together with the Loan Application Form. You will be asked to pay the processing fee, which is non-refundable.

Step #4 Wait for The Notice of Loan Approval or Letter of Guaranty. Or if you can’t wait on your mail box, phone them to follow-up the status of your loan application.

Step #5. Sign Loan Documents. There are some and will be provided at the Pag-IBIG Fund office.

Step #6: Visit the Bureau of Internal Revenue and Registry of Deeds.

Pay for the documentary stamps and capital gains tax at the BIR.
Have the Registry of Deeds put an annotation of mortgage on the Land Title.

Step #7. Get Loan Proceeds. But you have to show Pag-IBIG Fund the following documents:

Original Transfer Certificate of Title (TCT) in the name of the applicant with annotated mortgage
Deed of Absolute Sale with original stamp from the Registry of Deeds
New Tax Declaration in the name of the applicant
Updated Real Estate Tax Receipt (for house and lot, if applicable)
Occupancy Permit (secured from LGU Engineering Office, if applicable)
Assignment of Loan Proceeds

That’s it for the Pag-IBIG Housing Loan process — only seven steps.

Most likely, you will also be asked to make an advanced payment on the first monthly amortization immediately following the loan release. So have your cash or check ready.

Further Note: If you are buying a property from a real estate developer, this whole process would be easier. All that are needed is for you to follow Steps 1 to 3. Ask your agent or broker if he/she can assist on the housing loan application most often you will be extended an assistance.

Other Articles Related to Pag-IBIG Housing Loan:

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The Pag-IBIG Housing Loan Process is written by Carlos Velasco in response to website visitor requests.

Pag-IBIG Housing Loan Default and Foreclosure

by Pag-IBIG Financing Admin

Most real estate purchases and investments are made with the use of borrowed money; that is by mortgage loans.

In an ideal world, these mortgages are paid on time and are eventually fully paid including all the interest incurred by borrowing the money. But unforeseen circumstances do sometimes happen, which lead to loan defaults and, worst of all, mortgages being foreclosed.

Foreclosures are often painful on the part of the borrower and a hassle on the part of the lender. This is the reason why lenders are very strict in evaluating loan applications. It is not uncommon for lenders to ask for very detailed personal and financial information from their clients.

Why Loan Defaults Happen?

Given the fact that Housing Loan Default is something to be avoided, there are some reasons why they happen. Here are some common ones:

Personal and Financial Problems — the loss of a job, emergencies, calamities, or being assigned to another city.
Physical Flaws Of the Property — weak structure, dilapidated roads, flood-prone area, etc.
Legal Problems — land title disputes, marital problems

Loan Default Leads To Foreclosure

For regular Pag-IBIG Housing Loans, loan default happens when the borrower or any of his co-borrowers…

fails to pay three consecutive monthly amortizations
fails to pay monthly membership contributions
fails to comply other obligations of the loan

In the case of Pag-IBIG Rent-to-Own units, a default happens if you fail to pay three consecutive monthly rentals.

If the borrower defaults on a loan, the outstanding loan, accrued interest, penalties, fees and other charges become immediately due and demandable. Aside from that, Pag-IBIG also imposes that the “unpaid monthly payments shall continue to be charged with a penalty equivalent to 1/20 of 1% of the amount due for every day of delay.”

What To Do If Foreclosure Is Underway?

A foreclosure is a very stressful situation. Once you are at a point near that, knowing the options to take can greatly help.

If you find yourself unable to continue to make the scheduled payments on a mortgage loan, consider the following alternatives before it’s too late:

1. Sell the property and repay the loan. If you are lucky to have a friend or relative who has ready cash to pay for the property, this is the way to go.

2. Have someone assume the loan. Announcing to the whole world that you are in financial distress may help after all. Who knows, someone down there might be a good candidate and he could be interested in assuming your loan.

3. Restructure the loan. Discuss this with the lender; the Pag-IBIG Fund, in this context. A Loan Restructure might help reduce the payments temporarily.

4. Just let it be. That is, just allow the lender to continue with the foreclosure. Some properties really deserved to be foreclosed, most especially those that are really giving you a lot of headache instead of a roof over your head.

Prevent Foreclosure By Avoiding Loan Defaults

As a member of Pag-IBIG Fund, loan defaults and foreclosures are things to be avoided like a dreaded virus. Remember that once you have faced a foreclosure in your Pag-IBIG Housing Loan, you may be denied housing loans in the future.

One of the ways of preventing loan default is by first being honest with your finances. Before deciding to use a housing loan, consider your monthly expenses, you may have to do away some if your house is on top of your priority list. This requires a lot of discipline.

It is also very important that you know how to buy the right property that fits your needs. Don’t even consider buying in depressed areas and unsecure or unsafe neighborhood.

Note From The Website Administrator :

This website is not just about giving you inside information on Pag-IBIG Financing. We also intended to help everyone who is facing a foreclosure. If you know someone who has a property financed by Pag-IBIG and is on the verge of a foreclosure, please refer him / her to this website. The property can be listed here FREE of charge for every web visitor to see.

Again, that’s a FREE listing offered to distressed Pag-IBIG Members.

To avail of the FREE service, please send the details or leave us a message using the contact form provided on this website.

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This article on Pag-IBIG Housing Loan Default and Foreclosure is written by Carlos Velasco.

Getting a Loan? First Consider Getting A Pre-Qualification.

by Pag-IBIG Financing Admin

This is a very common scenario: Juan thinks he likes the house shown to him by the real estate broker. On impulse, he pays for a reservation fee to hold the property in his favour without even considering how much he has to cover for the down payment. A few days later thinks about mortgage financing.

Can you spot what’s wrong with Juan’s approach to buying?

Most likely than not, this will eventually lead him to losing his reservation fee… down the drain. Poor Juan, he never even knew what he is getting into.

Of course, Juan is not alone. I’ve seen many, many cases like this happen over and over again. I don’t know if it is the excitement of buying a house or just plain ignorance that caused them to be trapped into the deal.

For most of us, real estate is one of the most expensive investments we can make. That is why, many properties are bought in instalments, usually using mortgage loans with a little down payment.

Before you buy a piece of real estate, it helps if know the following:

The Amount of Down Payment you can comfortably shell out.
The Loan Amount you can comfortably shoulder.

Of the two, the second one is far more important because a mortgage loan entails a longer payment period and will probably take toll on your household budget.

The Loan Pre-Qualification Process

Pre-Qualification is an assessment process used to determine how much loan you can get. It can be either informal or formal.

An Informal Pre-Qualification can be done by you or by any real estate agent. This is a really quick-and-dirty method of determining how much you can afford based on the following factors:

Your income
Outstanding Debt

Since the person doing an informal pre-qualification is not really committed in giving you the loan, what usually happens is the whole process becomes simply an exercise in fantasy. That is, you could bloat your income or lower down your current debt. An ball park figure might come out giving you an idea of how much loan you can afford or you might be granted.

On the other hand, if you are really serious in buying a property, you should get a Formal Pre-Qualification. This process takes a little longer. At the very least, it involves the following:

Going to the office of a lending institution (Bank, Pag-IBIG)
Having you sign a Loan Application Form
You lay down your financial life on paper (your income, other assets, liabilities, outstanding loans, etc)
You may be asked some personal questions
Submitting some form of income documents
Checking On your Credit History

No Guarantee Of Getting A Loan

Take note that getting pre-qualified is not a guarantee that the lending institution will also grant you the loan that you can possibly afford. That involves an entirely different set of assessments.

The fact of the matter is you can pre-qualify yourself if you know the parameters used by the lender in the pre-qualification process.

The advantage of getting a formal pre-qualification is once you apply for a loan, the processing time will be a bit shorter since some preliminary steps have already been done in evaluating you as a loan applicant. The trick is to apply for a loan immediately as soon as you got pre-qualified. If you delay it, then you have to undergo another set of evaluations and a new set of fresh documents will be asked of you.

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This article on Loan Pre-Qualification is written by Carlos Velasco.

Insurance, Processing Fee And Other Pag-IBIG Housing Loan Expenses

by Pag-IBIG Financing Admin

Real estate properties are seldom bought on one-time, spot cash basis. Many buyers usually finance their homes for a longer payment period, say 10 years and even 30 years.

When purchasing a real property using long term financing such as Pag-IBIG Housing Loan, the buyer is usually asked to put a minimum down payment. This down payment is also called equity and represents the buyer’s stake (also called interest) on the property.

The majority of the cost of ownership is determined by the amortization payments; that is by the combination of the following factors:

Loan Interest
Loan Amount
Payment Terms

But, did you know that the amortizations are not the only expenses you have to shoulder when financing a property? A prudent buyer should be aware of other costs involved in purchasing a property.

Here are some of the charges you need to be mindful of when using Pag-IBIG Housing Loan.

1. Processing Fee — Pag-IBIG Housing Loan comes with a non-refundable processing fee of PhP 3,000 only, which is divided as:

Upon Loan Application, PhP 1,000
Upon loan take-out PhP 2,000

2. Mortgage / Sales Redemption Insurance (MRI / SRI): Borrowers sixty – five (65) years old and below as of the date of the loan application shall be covered by the MRI / SRI, provided that he / she will not be over seventy (70) years old on his / her birthday closest the date the loan expires. The schedule of the Pag–IBIG Fund Master Policy shall subject the MRI / SRI coverage of the borrower.

As for borrowers, who are bound into a single loan, it is only the principal borrower who will be covered by the MRI / SRI to the full amount of the loan. Therefore, in the event that the principal borrower dies, the MRI / SRI will extinguish the entire loan. However, in the event that one or more of the co – borrowers die, the principal borrower will continue to amortize the entire loan.

Interim Coverage: On the date of issuance of the Notice of Approval (NOA) or Letter of Guaranty (LOG) by the Pag–IBIG Fund, the interim MRI / SRI coverage on the principal borrower shall take effect.
Regular Coverage: This will be a non–medical, yearly renewable term insurance (YRT) for which the borrowers will pay an even premium rate effective upon loan – take out. The amount of coverage will be the entire amount of the loan.

3. Fire and Allied Perils Insurance: The borrower is to acquire this insurance on the mortgaged property or subject of the Contract to Sell. The amount of insurance is the lower of the appraised value of the residential unit or the amount of the loan. Note if you buy overseas you may also need strata insurance, there is an example at Flex Insurance.

4. Premium Payments: For the first year of coverage, the yearly premium will be prepaid. This prepayment will be deducted from the loan proceeds upon take – out of the loan. After the first year, the insurance coverage will be prepaid on a monthly basis and will be collected simultaneously with the monthly loan amortization.

5. POP Charges: An additional two pesos per thousand of coverage per annum (Php 2 / Php 1,000 / annum) will be charged to all loan applicants under the Pag–IBIG Overseas Program.

6. No Evidence Limit (NEL): The amount of the NEL will be two million pesos (Php 2,000,000). All borrowers aged up to sixty (60) years old, who have loans of up to Php 2,000,000, will not be subjected to underwriting approval.

7. A Health Statement Form (filled out by the applicant in his / her own handwriting, dated, signed and witnessed by at least two persons) will be submitted by borrowers over sixty (60) years of age for underwriting approval.

8. Full Medical Examination for Pag–IBIG Overseas Program (POP) Members over sixty (60) years old: The FME report may be done away with for POP members over sixty years old. In lieu of the FME, the Health Statement Form will be submitted. The applicant will also be required to submit a copy of the result of his / her medical examination done before his / her assignment overseas.

Once the applicant’s health is assessed to be “sub-standard”, he / she will be charged the additional premium.

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Insurance, Processing Fee and Other Pag-IBIG Housing Loan Charges is written by Kyro Jo.

Pag-Ibig Housing Loan Requirements

by Pag-IBIG Financing Admin

So you’ve finally decided to invest in real property using Pag-IBIG Housing Loan?

You figured that it’s about time that you apply for that Pag-IBIG Loan after all those years of faithful contributions to the Pag-IBIG Fund.

Now you ask yourself: “What are the requirements to avail of Pag-IBIG Housing Loan?”

There are standard requirements asked from the applicant upon Loan Application and prior to Loan Approval.

Additional requirements will also be asked from the applicant when deemed necessary by the Pag-IBIG Fund.

Documents Required Upon Loan Application

Housing Loan Application (HLA) notarized with ID photo – original copy
Approved Membership Status Verification Slip (MSVS) – original copy
Certified true copy of Transfer Certificate Title (TCT) of the property by the Registry of Deeds (latest title)
Photocopy of updated Tax Declaration
Location plan and Vicinity map

For Employed Pag-IBIG Members:

Notarized Certificate of Employment and Compensation (Pag-IBIG Format)
Notarized Certificate of Employment and Compensation (Employer’s Format) and one month latest Pay Slip
Income Tax Return/Certificate of Tax Withheld (W2 – Form 2316) and one month latest Pay Slip

For Self-Employed Pag-IBIG Member:

Income Tax return (one year) with Audited Financial Statements and Official Receipt of tax payment from Bank
DTI Registration
Business or Mayor’s Permit

For Pag-IBIG Overseas Program (POP):

Employment Contract or Employer’s Certificate of Income, duly certified by the employer (with English translation if in foreign language) or other valid Proof of Income
Special Power of Attorney (SPA) notarized prior to date of departure or duly certified and authenticated by the Philippine Embassy or Consulate in the country where the member is staying, for members abroad

Additional Requirements

pag-ibig housing loan application
Depending on the purpose of your housing loan, Pag-IBIG may ask that you submit the following upon Loan
Application.

Purchase of Lot or Purchase of Residential Unit

Contract to Sell Purchase Agreement – original copy.

House Construction or Home Improvement

Building Plans, Specifications and Bill of Materials duly signed by the Licensed Civil Engineer or Architect
Real Estate Tax Receipt

Refinancing of an Existing Loan

Statement of Account on the outstanding balance and also indicating the purpose of the loan
Any of the following documents:
- Official Receipt for the past twelve months
- Subsidiary Ledger
- Any proof of payment for the past twelve months

Lot Purchase and House Construction

Comply the requirements for lot purchase and for lot construction.

Note: Pag-IBIG Fund reserves the right to require additional requirements
to facilitate the loan evaluation process.

Documents required prior to Loan Release (upon approval)

TCT in the name of the borrower with proper mortgage annotation in favor of Pag-IBIG Fund (Owner’s Copy)
Certified true copy of TCT in the name of the borrower with proper mortgage annotation in favor of Pag-IBIG Fund (RD’s copy)
Photocopy of New Tax Declaration in the name of the Borrower and Updated Tax Receipt
Proof of Billing
Loan Mortgage Documents
- Loan and Mortgage Agreement with original RD stamp
- Notarized Promissory Note
- Disclosure Statement on Loan Transaction
For The Employed Members : Collection Servicing Agreement with Authority to Deduct Loan Amortization or Post – Dated Checks
For The Self–Employed Members: Post–Dated Checks

Additional Documents Prior to Loan Release Depending on Loan Purpose

Purchase of Lot or Purchase of Residential Unit:

Deed of Absolute Sale with original RD stamp.

House Construction or Home Improvement:

Building, Electrical, and Sanitary Permits duly approved by the building officials
Occupancy Permit.

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Pag-IBIG Housing Loan Requirements is written by Niel Kyro Jo.

NOTE: Due to a large number of comments on this particular article, any new comment are not allowed anymore.

What Is Loan-To-Value Ratio?

by Pag-IBIG Financing Admin

A key concept in helping home buyers assess how much they can borrow to finance their real property investment is the Loan – To – Value Ratio.

The Loan–To–Value Ratio (LTV for brevity) is the amount of the borrower’s loan divided by the appraised value of the property.

LTV = (Loan Amount) / (Appraised Value)

To illustrate, assume that Mr. Delos Reyes purchased a new house by the countryside worth PhP 3,000,000. He plans to borrow Php 2,400,000 from a local bank to finance his real estate investment.

Applying the concept, we get a Loan–To–Value Ratio of 80% for Mr. Delos Reyes.

LTV = (2,400,000) / (3,000,000)
LTV = 80%

Take note that in this example, we are assuming that the selling price is also the appraised value. In reality, banks will conduct their own appraisal of the property. The resulting Appraised value is used instead of the selling price, to divide the loan amount to finally determine the LTV ratio.

Equity and Loan-To-Value

Actually, the LTV ratio is the reverse of a borrower’s equity. Therefore, in our set example, since Mr. Delos Reyes has an 80% LTV ratio; he has equity of 20%.

By equity, we mean “how much a borrower owns in the value of his / her real property investment.”

So in Mr. Delos Reyes’s case, he only owns 20% of the value of his investment and owes 80% of it.

From the lender’s viewpoint, the higher equity you have tied up on your property, the less risky you are as a borrower.

A high loan-to-value ration also means that a home buyer owes more than he owns in the value of his investment. Therefore, banks will see the home buyer’s loan as one that is risky.

Low Down, High Loan-To-Value

Pag-IBIG Fund is a leading company in the Philippines that offers lower down payment and a high loan-to-value ratio, as high as 97.0% is some cases.

Other financial institutions are offering the same. But you will be required to pay for a private mortgage insurance to lessen the impact of the risk that they are placing on you as a borrower.

Financial Leverage and Loan-To-Value Ratio

Financial Leverage means the use of borrowed money to finance a real estate investment. From an investor’s viewpoint, the higher the leverage, the better because of the following reasons:

Their risk is minimized
More Cash available for other investments

The Importance of Loan-To-Value Ratio

Financial institutions generally look for three vital factors when qualifying you for a loan. These are:

credit score
debt-to-income ratio
loan-to-value ratio

These factors are the benchmarks that helps the banks determine the following:

the amount of loan to give you
the interest rate of the loan
the loan term
whether the borrower is required to pay for a private mortgage insurance

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This article on Loan-To-Value ratio is written by Niel Kyro Jo.