Pag-IBIG Mortgage

Housing Loan Preparation: How To Flex Your Financial Muscle

“Get your finances in order.”

You have probably read that statement several times on different pages of this website. Usually, it is the response we give to visitors who are asking for guidance on how to get, and eventually be approved for, a housing loan from the Pag-IBIG Fund.

The phrase is very brief but it means a lot of things, which I will attempt to elaborate here in details.
Essentially, I’ll be talking financial talks that relate to the following topics:

Employment or Business Track Record
Level of Income
Credit History

That’s it — just these three things are enough to help you flex your financial muscles so that you’ll be ready to face your loan officer. If you get them right, you’ll be smiling for making such a preparation. And take note, the same concept is applicable also to any loan application from any financial institution like the bank and credit cooperative.

Okay, let’s take them one by one.

Employment or Business Track Record

Quite simply, this is revealed by such question as, “How long have you been in business or in your current work or profession?”

The answer to this question is very important to the lending institution because it tells something about the stability of your income.

There are many ways a private lending institution can get a handle of this information. Depending on your source of income, some banks will be asking you the following:

Your contract of employment — with stated terms of contract and salary
Remittances in the Philippines (For OFW)
Bank Statements
Financial Statements for the past 2 years (for businesses)

Pag-IBIG Housing Loan Preparation Checklist In the case of Pag-IBIG Fund, one of the ways they can check this is by simply looking at your membership records with the Fund. Ever wonder why the Pag-IBIG Fund requires its members to have contributed at least 24 months of contributions? The very reason is that, they want to make sure that you have a steady source of income for the past two years. Somehow that gives them a hint of your employment record.

So the next time you are thinking about getting a loan, remember to take more time to reflect first on your employment, professional or business history. Stability in your work or line of business is the key. The longer you are in your work, profession or business, the more chances you have to being qualified for the Pag-IBIG Housing loan.

Pag-IBIG Financing Tip #1: Learn about Loan Pre-Qualification and its importance.

Level of Income

This one is very obvious. The higher your income level, the better chances of getting qualified for a housing loan, and the higher the loan amount entitlement also.

Question: If my income is P 35k per month, am I qualified for a housing loan with Pag-IBIG amounting to P 1.5 M?

Answer: Yes, but you should probably try to settle on a lesser amount of loan or strive to come up with an augmented income. Remember, your monthly amortization will also take a toll on your family’s budget. You don’t want to tie up a bulk of your expenses just paying of your home loan.

The answer to the question above is based on Pag-IBIG Fund’s Guidelines relating the income and member’s contributions to this loan amount entitlement. For more details, please check on the article entitled “How Your Income And Contributions Affect Your Housing Loan Entitlement“.

Pag-IBIG Financing Tip #2: As a general rule, you are safe if you select a loan amount and term where the resulting monthly amortization is less than 1/3 of your net monthly income.

Credit History

A borrower’s bad credit history really turns off any lending institution. Be careful about having a history of cancelled credit card because it will haunt you down once you apply for a loan from any bank in the country.

The current Housing Loan Application Form of Pag-IBIG already includes fields about the loan applicant’s credit cards. But some borrowers who have a bad credit history can simply skip on those blank items so that the Pag-IBIG staff won’t bother. But someday soon, it will become a critical part of the housing loan qualification process.

Essentially, what this means to all Pag-IBIG Fund members who want to apply for a housing loan is that, they should not make any Pag-IBIG Loan they can’t make up. Any unpaid loan you have made with Pag-IBIG can definitely affect any loan application you will make with the Fund.

Pag-IBIG Financing Tip #3: Don’t be careless even on small amount of loans. It can make or break your reputation with the Pag-IBIG Fund.

Pag-IBIG Housing Loan Amortization Demystified

by Pag-IBIG Financing Admin

This is one of those topics that a lot real estate buyers are clueless about. Many of them just don’t know how the monthly amortization is determined. This is true for both the first time as well as the seasoned home buyers — and a few real estate agents I’ve met. They simply let the bank, or any lending institution for that matter, handle the computation for them.

Take this particular question shown below which is commonly encountered by real estate sales people.

“How much is the monthly payment for this house which is priced at P1.2M?”

First, any attempt to give a figurative amount to answer that question is meaningless. For one, the question itself is already wrong.

Home Loan Computation: The Amortization Formula

The monthly amortization — or the monthly payment, if you will — is a figure that is dependent on three factors:

Loan Amount. The actual amount borrowed, usually the selling price less the down payment.
Interest rate. This figure is usually expressed as per annum value, likewise known as annualized interest rate. If you are familiar with bank financing, you have probably noticed that the interest rate is different for each bank. In the case of Pag-IBIG Housing Loan, the interest rate is dependent on the loan amount.
Loan term. This tells how long the loan is going to be fully paid; also normally expressed in terms of the number of years. In Pag-IBIG Home Financing, the loan term is usually 15 years or 30 years, though, you may also opt for a shorter loan term.

To determine the monthly amortization, we can simply use this equation:

Amortization Equation -- For Pag-IBIG Housing Loans or Bank Loans

Essentially, this amortization formula says that

Given a fixed interest rate and loan term, your monthly amortization is directly proportional to the amount of loan. The bigger the loan amount, the bigger the monthly amortization due.
Given a fixed interest rate and a particular loan amount, the monthly amortization is inversely proportional to the payment period. The shorter the payment period, the larger the amortization; the longer the payment period, the smaller the monthly payment due.

In other words, while you may be paying a higher monthly amount for a 15-year mortgage compared to a 30-year mortgage, the primary advantage to you is that the loan if fully paid in a shorter period of time.

The main advantage of using the formula above is that it is very handy and versatile. Anyone can use it given any amount of loan, loan term and interest rate.

However, a lot of people are simply lost with Mathematical equations. And not amount of explanations will ever want them to use any formula to determine any figure.

Luckily for them, there is also another way of determining the monthly amortization and that is by using an Mortgage Factors Table such as the one shown below.

The Pag-IBIG Mortgage Factors Table

Take note that this table is made especially for The Pag-IBIG Housing Loan with interest rates effective at the time of this writing (April 2011). You can use it for loan terms starting from 1 year to a maximum of 30 years loan term.

The annual interest rate shown is only the following: 6%, 7%, 8.5%, 9.5%, 10.5% and 11.5%. For interest rates other than these, the table is not applicable anymore. It’s best to use a Mortgage Calculator – a tool which will become available on this website soon.

Pag-IBIG Home Loan Amortization Factors

Given the table above, it is now very easy to determine the monthly amortization by simply following this understandable formula:

Monthly Amortization = (Loanable Amount) x (Factor Rate)

Sample Computation

Consider this hypothetical case: You are buying a Pag-IBIG Home worth P 1.2M and you are planning to put a down payment of P 240,000 which is 20% of the selling price. How much then would be the monthly amortization if you are to pay it is 15 years? How about if the loan is to be paid in 30 years?

Please be guided by the formula above and the interest rates of Pag-IBIG Housing Loan shown below.

Pag-IBIG Housing Loan Interest Rate

From the case in point and looking at the Factor Rates shown at the Table, we can gather the following:

Loan Amount: 960,000 (this is Price 1,200,000 less Down Payment of 240,000 )

For 15-Year Mortgage, the Factor Rate = 0.00984740.

Monthly Amortization (in 15 years) = (960,000) x (0.00984740) = 9,453.50

For a 30-year mortgage, the factor rate = 0.00768913

Monthly Amortization (in 30 years) = (960,000) x (0.00768913) = 7,381.56

When using this formula, take note we are not putting into consideration some other trivial payments like fire insurance, mortgage redemption insurance, membership dues and others. We are leaving that for the sake of simplifying the illustration.

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Update: A more detailed article about the Amortization and Mortgage Calculator has been made on this website. Please check it now.

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“Pag-IBIG Housing Loan Amortization Demystified” is written by Carlos Velasco.

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.

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.

Mortgage Loan Fundamentals

by Pag-IBIG Financing Admin

Real estate properties are seldom bought on spot cash. The vast majority are purchased with a little down payment and mortgage loans on the balance.

A mortgage loan is a form of secured financing; that is, the lender gives you the needed financing and in return you pledge the property as collateral.

In a mortgage loan, there are two very important documents that you will be committed to:

Note – is a promise to repay the loan on a timely basis
Mortgage or Deed of Trust – is a pledge to secure the loan with the real estate in question in case the borrower fails on his loan obligations.

A mortgage creates a lien on the property, which gives the lender the right to foreclose the property in question.

A loan default happens when you fail to repay the loan “on time” as stipulated on the contract. If that happens, the lender can foreclose the mortgage and take on the property.

Interest Rate and Loan Term

A mortgage loan has two very important components that you need to be aware of.

Interest rate – is the price of using the lender’s money and is applied to the principal balance. A lower interest rate means a cheaper use of the lender’s money and should be good for you.
Loan term – the time it takes to pay off the whole amount borrowed. Loan term usually spans a number of years.

These two factors primarily affect the installment payments, which is usually on a monthly basis.

The amount shown on the monthly installment schedule always remains constant. When you pay off a loan, a portion goes to the interest payment and another portion goes to pay off the principal amount. In other words, the principal balance is reduced with each payment that you make. And as a consequence, the interest is also reduced as the loan matures. Early installments mostly go to the interest payments while later installments mostly cover the principal.

Down Payment and Mortgage

Most lenders will not grant you a loan that is equivalent to the selling price of the property. In many cases, they will have to appraise the property and you will be asked to put a down payment and loan the remaining balance of the appraised value.

The down payment is sometimes referred to as equity on the property.

The standard down payment is 20% of the appraised value of the property; 80% being your loan or the financed amount.

The more money you put as down payment, the lower your loan will be. And always remember that the loan bears an interest.

Now comes the question: Which is better of the two?

A low down payment and large loan.
A large down payment and small loan.

There are arguments favoring one over the other. It’s all up to you and your circumstances. But sometimes, the lender will force you to take on lower loan (with large down payment) to lower their risk of loaning you the money to finance your real estate purchase. That’s just pure business.

Pag-IBIG Mortgage Loan

Depending on the property and where you are buying it, Pag-IBIG Fund may give you a large amount of loan which is almost equal to the selling price of the property. But always bear in mind the maximum loan amount the Pag-IBIG Fund can grant you. If you find the amount too small for the property you are considering, you may need to come up with a large down payment or you may use an alternative financial institution.

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Mortgage Loan Fundamentals is written by Carlos Velasco.