As a prospective homebuyer in the Philippines, you’ve likely come across terms such as “pre-approved” or “pre-qualified” when talking about home loans. These terms are an important initial step for anyone serious about buying property, as they provide an early indication of how much you can borrow from a bank. Of course, if you’re buying property in cash, you’re all set. But for the majority of homebuyers, taking out a mortgage is a practical and more realistic way of owning a home. Even better, a pre-approved loan empowers you with a clear budget and allows you to focus on properties that match your financial capacity. Moreover, achieving pre-qualified or pre-approval status demonstrates to sellers that you are a qualified and committed buyer. It’s not just the money, though. This good credit standing can give you a competitive edge in high-demand markets.

6 Tips on Securing Pre-Approved Home Loans

Do you want to find out if you qualify for pre-approved home loans? If you have to ask, you probably need to put in some more work on making your financial status more visible and palatable to lending institutions. Below are some tips that can help you navigate the ins and outs of getting a home loan or even better, securing pre-approved status.    

1. Determine What You Can Afford

The first step to securing a home loan is understanding what you can realistically afford. Setting a budget helps you avoid overextending yourself financially, especially when unexpected expenses arise. In addition to the down payment and monthly mortgage payments, expect to pay around 3-5% of the property’s purchase price on costs such as property taxes, transfer taxes, registration fees, insurance, and more. 

For a property priced at ₱5 million, these extra costs could total approximately ₱150,000 to ₱250,000. Factoring in these fees provides a clearer picture of the total financial commitment. For a more detailed breakdown of each fee, check out this handy guide on fees and taxes that come with buying a house.

2. Improve Your Chances of Approval

Securing a home loan pre-approval involves preparing your financial profile to meet the requirements of local banks. In the Philippines, your credit score, income stability, and debt-to-income ratio are crucial factors. The specific criteria depend on which bank you’re dealing with. For example, BPI and RCBC expect a solid credit history. If you’re aiming to buy a property from Vista Land in Davao City, a strong credit score will make banks more likely to approve your home loan pre-approval. You can improve your credit score by paying off existing debts and maintaining a steady income.

However, some banks such as Landbank and Security Bank prefer to check your debt-to-income ratio to gauge your repayment capacity. For instance, if you have a monthly income of ₱100,000, banks might expect that no more than 30-35% goes toward debt payments, including your potential mortgage.

3. Learn What Banks Consider in Their Decision

Philippine banks have specific criteria when assessing home loan pre-approval applications. Key factors include income stability, credit history, the value of the property, and its location.

For example, BDO, one of the country’s largest banks, examines your employment record or business background for self-employed applicants. They may ask for three months’ worth of payslips or recent business documents. Additionally, banks may give preference to properties from accredited developers, such as those by SMDC or Megaworld, especially in prime areas like Quezon City.

Meanwhile, banks like PNB and Security Bank also consider the property’s market value and location. Properties in well-developed areas or those by reputable developers may increase your chances of home loan pre-approval, as they pose less risk for the bank.

4. Understand the Pre-Approval Process

Applying for home loans to buy properties in the Philippines typically takes several steps. It starts with the buyer contacting a local bank or mortgage broker to inquire about loan rates and eligibility. You’ll be asked to prepare and submit documents such as proof of income, valid government IDs, and bank statements. BPI, for instance, may require a Certificate of Employment or ITR for self-employed borrowers.

Upon completion of all required submissions, the bank will evaluate your credit history and debt-to-income ratio. Most assessment processes can take up to a week. If you qualify, you’ll receive a conditional pre-approval letter if approved. Banks will then issue pre-approvals valid for 60-90 days. Use this time to secure a property, as pre-approval terms may change due to fluctuations in interest rates.

A good tip to remember is that most properties have ties with specific banks or locations. These partnerships can streamline the home loan pre-approval process and may offer exclusive terms for buyers.

5. Learn the Difference Between Pre-Qualified vs. Pre-Approved

Pre-qualification and pre-approval are often confused but have key differences. Pre-qualification is an informal assessment based on general information about your finances, while home loan pre-approval involves a detailed financial check. In other words, pre-qualified determines your potential, while pre-approved confirms your qualification.  

A pre-qualification from BPI can be done online with just basic details. However, securing pre-approved home loan-approval requires an in-depth review of your financial records. For instance, if you’re looking at a Camella Homes property outside Metro Manila, a pre-approval from a local bank like Security Bank may carry more weight with the developer.

Meanwhile, having a pre-approval certification from a bank demonstrates confidence in your ability to take out a home loan. This can be advantageous in competitive markets where sellers have the luxury of choosing the buyers. This is especially true when dealing with established developers such as Ayala Land or SMDC.

6. Find Out Which Banks Offer Pre-Approval

While most major Philippine banks offer pre-approved home loans, some regional banks may only provide pre-qualification due to limited resources or a smaller scope of operations. Major banks like Metrobank, Landbank, BDO, and PNB all offer pre-approved home loans for residential properties nationwide. Meanwhile, smaller-scale rural banks such as Banco de Oro Rural may only offer pre-qualification, particularly in areas outside major urban centers.

To get the most accurate and updated information, visit the official websites of the banks you’re interested in. Or better yet, visit various local banks and talk to each bank manager about their current home loan rates as well as their promos and deals. Alternatively, you can always consult a real estate professional or licensed broker for their inside information on home loan pre-approval options. Checking multiple banks can help you find one that offers the best terms for your preferred property location.

Final Tips for Securing Pre-Approved Home Loans

It’s not just luck that favors the prepared. When applying for things like visas or bank loans, it’s best to be prepared for their requirements. A good rule of thumb before approaching any agency or lending institution is to secure a list of requirements. This allows you to secure the documents you need before even stepping foot in a bank. While preparing your papers, make sure to keep updated financial records to make the home loan pre-approval process as smooth as possible.

To get the best deals, take the time to consult with several banks and compare home loan terms. You might find that a bank offers special rates for properties in certain locations or from specific developers. For expert help, you might want to consult a licensed real estate agent as they’re very familiar with the local market and have ties with specific developers. They can offer guidance that’s tailored to your preferred property type and help open a few doors with developers. Remember, you can’t choose the best option if you don’t ask around.

Ohmyhome can help you find your dream home

Obtaining pre-approved home loans before beginning your property search in the Philippines is a practical step toward homeownership. Not only does it provide clarity on your budget, but it also positions you as a qualified buyer ready to make an offer. With an approved budget and bank commitment, you can confidently explore properties by top developers, knowing you’re prepared to secure your dream home.When searching for the perfect properties, let Ohmyhome guide you in your journey. The Philippines’ premier property tech platform has partnered with over 200 of the country’s top real estate developers to amass a considerable listing of thousands of available properties. Our licensed real estate professionals and friendly customer service specialists are always ready to assist you and answer your questions.

Ohmyome not only helps you get the dream home you’ve always wanted. We’ll stick around to help you get through your home loan applications as well. Message us so we can help you find your dream home.