Avoid the common pitfalls in housing loans

By Tessa Salazar
Philippine Daily Inquirer
August 07, 2009

MANILA, Philippines – First-time buyers of houses and lots who find the housing loan terms and limits of private banks too steep would be relieved to know that they are most welcome to apply for a Pag-Ibig housing loan.

In fact, the most number of Pag-Ibig housing loan member/applicants belong to the economic bracket of those who can afford to buy a house and lot worth only P400,000-P750,000 bracket with more than 16,000 borrowers and P400,000 or less having the next most number of borrowers with over 9,000.

And from these tens of thousands of borrowers, Pag-Ibig shares with Inquirer Property a laundry list of housing loan no-nos that could result in delayed, or even denied, applications.

1. The amount on the Deed of Absolute Sale is lower than the approved loan. The amount should never be less than the approved loan.

2. Applying for loan to buy a property with an encumbrance (a general term for any claim or lien on a parcel of real property). These include mortgages, deeds of trust, recorded abstracts of judgment, unpaid real property taxes, tax liens, mechanic’s liens, easements, and water or timber rights. While the owner has title, any encumbrance is usually on record (with the County Recorder or Recorder of Deeds) and must be paid for at some point.), e.g., Section 7 (reconstitution) or Section 4 (Heirs).

Solution: Before the actual execution of the contract, verify with the HDMF (Home Development Mutual Fund) if the property is acceptable to the institution.

3. Inclusion of improvements outside of the unit (e.g., fence) which is not part of the HDMF financing.

Solution: Consult HDMF first before pursuing the construction

4. Part of the bill of materials was reduced (some items such as ceiling and flooring were deleted) just so this will fit the loan amount granted for construction. However, the borrower still utilizes the releases to finance the same items that were earlier deleted, resulting in lower succeeding loan releases.

Solution: Follow the bill of materials evaluated by the HDMF.

5. Borrowers who are separated from their husbands/wives apply for housing loans even without the signature of the spouse.

Solution: The member should present his or her legal separation papers before the Fund can accept the loan application.

Aside from Pag-Ibig Fund, the Government Service Insurance System, the Social Security System and the Land Bank of the Philippines are also into home financing. However, as of 2007, the Pag-Ibig Fund recorded the single biggest share in the country’s housing loan portfolio, making up 40 percent, which is higher than the total amount loaned out by all banks combined.

For inquiries, call the Pag-Ibig hotline at 724-4244.