As a result of the ongoing Covid-19 pandemic, interest rates on home loans are at their lowest. For most of 2021, the Bangko Sentral ng Pilipinas (BSP) held key overnight borrowing steady at a record low of 2%, while interest rates on overnight deposit and lending facilities have also remained at 1.5% and 2.5%, respectively. The Home Development Mutual Fund, or Pag-IBIG, on the other hand, also currently offers home financing at some of its lowest interest rates in over a decade.
With that said, it is surely an ideal time to borrow money and invest in a property despite the pandemic. Unfortunately, approval of a home loan is not always guaranteed, since there are specific criteria that need to be met with each type.
Not qualifying for a loan, however, does not necessarily mean not being qualified for homeownership. Knowing what to do next can help in recognizing your options that will eventually lead to a successful home purchase.
Determine the reason for disapproval
The first thing to do upon being notified of your home loan application being rejected is to be mindful of why.
Since banks are governed by law to follow certain criteria when approving or rejecting loans, they have the same obligation to borrowers to provide details on why there is any reason for the latter.
If you’re working with a financial adviser, he or she will likely provide details of why your loan application was not accepted and should provide alternative options.
Consider purchasing a more affordable property
One such alternative is to consider the possibility of buying a home priced a little less than the one you were trying to get a loan for.
This is because there are instances when borrowers are not necessarily denied a loan together but simply don’t receive approval for the principal amount they applied for because it is significantly larger than the borrower’s savings and other finances.
By considering property for sale that is a little more affordable, and subsequently applying for a home loan with a lower principal amount, your credit and other finances may be substantial enough to result in its approval.
Or purchase an outright different type of property
If not because of the price, some home loans get rejected because of the home itself. Most lending institutions follow rigid standards when evaluating the homes their loans are used for because the land titles of these properties also serve as collateral during the life of the loan.
While banks ideally do not want their borrowers’ loans entering default, they always consider the possibility and choose to avoid receiving the rights to a property that is problematic to sell–something they would have to do if a borrower is indeed unable to make monthly loan payments.
Buying a home that is brand new and built by a reputable developer is an easy way to avoid this type of scenario. You can find the best and latest of those properties here.
Explore other loan options
If the reason for the denial of a loan application is not the property in question, then it might be (actually, it is more often) because of a borrower’s current finances.
Income that is not yet established enough to be considered sufficient for covering monthly payments, or existing or outstanding loans, can hinder one’s chances at borrowing a large sum for a home.
When this happens, it is best to speak with finance or real estate professionals and ask if other home loan programs may be better suited to your needs and fit your present finances. These would likely also be offered to you when your initial application isn’t approved, as most banks will try to accommodate borrowers’ needs whenever they can to keep them as clients.
Apply for a home loan elsewhere
Even when your loan application with one specific lender is declined, it in no way disqualifies you from applying for a loan with other banks. Granted, most private financial institutions more or less follow similar qualifications for their home loans, but some offer a wider variety of loan programs, while others are also a little less stringent in their approval process.
To make this easier, you can reach out to an Ohmyhome agent, as Ohmyhome can help you make applications for home loans through most major banks, saving you time in the process.
You can also opt to explore options with the Home Development Mutual Fund, which had released a record Php27.39 billion in home loans in the first four months of 2021, 64-percent more than what they lent in the same period in 2020. If you’ve been a remitting Pag-IBIG member for at least 24 consecutive months, you are eligible for a Pag-IBIG home loan.
Apart from Pag-IBIG, you can also look to mortgage loans from cooperatives, as well as in-house or direct financing from the developers of brand new homes themselves.
Consider borrowing with a co-signer/co-borrower
If for some reason you still do not qualify for any other loan program with any other lender on your own, another route is to submit a new loan application but this time with a co-borrower. The person you sign with, for all intents and purposes, should be one with finances and a credit history that is of the best possible standing for a greater chance at approval.
This is an option that should be considered a last resort as you’d not want to place any loan liabilities on anyone else but yourself. But in case you do need to explore it, it is most ideal to share the responsibility with someone with whom you will share the home. Your spouse as a co-borrower is who would most come to mind, but could easily be a parent, sibling, or in-law.
It’d be best to check with your loan provider if they allow for applying with a co-borrower, and understand who they deem qualified.
Looking to move forward with your home buying goals and apply for a home loan? Connect with an Ohmyhome agent to receive expert assistance throughout the entire property process, be it finding a home to buy or applying for a loan for it. To view the best and latest houses and condos for sale in the Philippines, visit Ohmyhome.com or download the Ohmyhome app today!
Ohmyhome was launched in the Philippines in September 2020, following the company’s establishment of a tech team in the country in 2017. Ohmyhome was originally founded in 2016, and subsequently rose in Singapore as a leading PropTech solution and licensed real estate agency.
Ohmyhome expanded into the Philippines so that Filipino home seekers can have a real estate partner that they can trust to have their best interests at heart and can be relied upon to provide exceptional services throughout the entire property journey.
Featuring thousands of properties across many of the Philippines’ major real estate brands, Ohmyhome differs from other local platforms by going the extra mile and extensively helping buyers narrow down their choices and find the property that best suits their budgets, home needs, and lifestyle preferences.
The company’s Real Estate agents help in the shortlisting of options and provide professional services through the entire purchasing process. These include assistance in property inspections, negotiations, the finalization of the Conditions of Sale, deposit collection, the submission of property documents, as well as providing buyers regular updates.
Ohmyhome helps Filipinos find their dream homes, all while making sure each real estate transaction is complete and is an efficient and enjoyable experience.