Why Bank Financing is Better Compared to Other Financing?

When looking for a home loan, there are three primary options that aspiring homeowners in the Philippines can choose from — in-house financing, Pag-IBIG financing, and bank financing. Each has their own advantages depending on your preference and current financial circumstances.

But here, we'll tell you why bank financing is better compared to other financing options. We'll discuss its key benefits, and why you should highly consider it as your top financing choice to acquire your future house and lot in the Philippines.

What is Bank Financing?

Bank financing is also called a housing loan or home loan in the Philippines. Banks and other financial institutions provide home loans to qualified applicants for the funding and purchase of their dream house and lot. Aside from a property purchase from a developer or private seller, banks also offer loans for home improvements, renovations, or refinancing of an existing loan.

Why Choose Bank Financing over In-House and Pag-IBIG?

Real estate developers offer in-house financing and are often the last resort of aspiring property owners if their application get rejected by bank or Pag-IBIG. Meanwhile, Pag-IBIG is best for minimum-wage earners or Pag-IBIG members who want to avail of affordable house and lot.

But bank financing Philippines is ultimately the best for the following reasons:

Lower interest rates

One of the top reasons why home loan applicants prefer banks to help fund their property purchase is because of lower interest rates compared to in-house and Pag-IBIG. The same goes with applying for car loans; banks offer lower interest rates as well compared with auto dealers.

Shorter loan tenor

If you prefer to pay off your loan obligations in a slightly shorter amount of time, bank financing is your best bet. In-house financing has a loan tenor of up to 25 years, while Pag-IBIG takes more at 30 years. Bank financing, on the other hand, takes mostly up to 20 years.

Higher loanable amount

Another good thing about bank loans is that you can avail of a higher loanable amount. This means you can choose a more expensive property with quality home features and amenities if you want to, provided you have the financial capacity to pay for it.

Flexible repayment terms

Most banks offer flexible payment options to allow homebuyers to choose the best term where they can fulfill their loan payment obligations without unreasonable delay. You can also help shorten your repayment period if you increase your down payment amount.

Fast processing upon submission of complete requirements

Banks are known to be strict and stringent when it comes to document requirements. But if you submitted them all and you qualify based on your credit history, employment, and other relevant factors, your loan processing takes less compared to in-house financing and Pag-IBIG.

Tax perks

The national government encourages Filipino families to secure their own home in the Philippines by offering tax deductions for their house purchase. This way, you save money on interest rates and other associated costs.

Bank Housing Loan Qualification Requirements

Needless to say, application alone does not guarantee approval of bank loans. Banks have their own set of criteria as to who can qualify based on the following requirements:

Stable employment

One of the primary requirements of any loan application is having a stable source of income. After all, it demonstrates your repayment capability. Your monthly income will determine whether you have the necessary economic means to pay for your future loan on top of your other financial obligations, such as water and electricity bills, groceries, and emergency fund.

Good credit score

Banks will scrutinize your credit report and check whether you're a responsible borrower based on your past loans. Monthly payment delinquencies and non-payments altogether are a recipe for rejection. As such, consider checking for your credit standing by asking for a copy from the Credit Information Corporation. If you find out that your credit score is low and you see inconsistencies and inaccuracies in the report, you can file for a dispute.

Down payment and processing fees

Aside from proving your repaying capabilities through stable employment and responsible borrowing history, you have to have money set aside for the down payment and processing fees. The bank or financial institution of your choice will help you fund your affordable house and lot for sale, but having a high down payment amount will help you reduce your monthly amortization and again show your economic competence. In addition, you have to assume that, besides the house and lot purchase itself, you have to prepare money for other associated costs. This way, you will not be caught off guard from the number of payment obligations you need to secure before you can officially acquire your dream property.

Home loan application documents

Sometimes, home loan applicants get automatically rejected for submitting incomplete requirements. Save yourself from this embarrassment by making sure to have a checklist of the documents that you have to submit.

For your bank loan, below are the papers you need to prepare and submit for home loan application and approval. We'll list Security Bank's documentary requirements as an example below.

Eligibility requirements

• You must be at the very least 21 years of age, but not exceeding 65 years of age when the loan reaches its maturity date

• You, with or without a spouse or co-borrower, must have a combined monthly income of ₱50,000

• You must be continuously salaried for a minimum of 2 years

Required documents for locally employed applicants:

• Duly accomplished home loan application form

• Clear copy of one valid ID bearing a photo of the borrower/spouse/co-borrower

• At least ONE of the following: Certificate of Employment, latest income tax return (ITR), three-month pay slips, or three-month bank statements

• Mortgage Redemption Insurance (MRI) Application Form

• Collateral documents, if applicable

• Special Power of Attorney

• Authorization Letter Template for Property Collateral Verification and Tax Mapping

Required documents for self-employed borrowers:

• Duly accomplished home loan application form

• Clear copy of one valid ID bearing a photo of the borrower/spouse/co-borrower

• Latest Income Tax Return (BIR Form 1701 for sole proprietors, Form 1702 for corporations)

• At least ONE of the following: Audited financial statements for a year, bank statements for the last three months, and lease or rental contracts

• Mortgage Redemption Insurance (MRI) Application Form

• Collateral documents, if applicable

• Special Power of Attorney

• Authorization Letter Template for Property Collateral Verification and Tax Mapping

Required documents for OFW borrowers:

• Duly accomplished home loan application form

• Clear copy of one valid ID bearing a photo of the borrower/spouse/co-borrower

• Latest Income Tax Return (BIR Form 1701 for sole proprietors, Form 1702 for corporations)

• At least one of the following: Audited financial statements for a year, bank statements for the last three months, and lease or rental contracts

• Mortgage Redemption Insurance (MRI) Application Form

• Collateral documents, if applicable

• If with an attorney in fact, a Consularized Special Power of Attorney is mandatory

• Authorization Letter Template for Property Collateral Verification and Tax Mapping

In summary, bank housing loans are perfect for borrowers who want to avail of lower interest rates, shorter loan term, higher loanable amount, flexible repayment terms, and fast approval provided that complete requirements have been submitted and that applicants qualify based on the standards set, especially when it comes to employment status and credit history.

If you're eyeing affordability and quality at the same time, Lumina Homes is the perfect housing brand for your bank loan. For as low as one million pesos, you can have your dream real estate property in an accessible community in the province. On top of this, all of our Lumina projects nationwide are strategically situated near schools, health centers and hospitals, supermarkets, local government offices, tourist spots, public transportation, and more.

Ready to seal your house and lot investment with Lumina Homes? Inquire now and become a Lumina homeowner this 2023!