Buying a home in the Philippines can happen in many ways. Some build on inherited land, others save up to pay in cash, while many, like me, choose to go through financing.
Three Common Financing Options in the Philippines
You can acquire a house through bank loans, Pag-IBIG housing loans, or in-house financing offered by developers, each with its own requirements, timelines, and trade-offs.
- Bank Financing. This is the most common option for buyers with a stable income and a good credit score. In this option, you apply for a loan through a commercial bank (like BDO, BPI, or Metrobank).
Pros: They usually cover 70% to 80% of the appraised value of the property. Banks also offer the lowest interest rates and have “flexible fixing periods” (meaning you can lock your rate for 1, 3, or 5 years so your payments don’t fluctuate).
Cons: They are very strict with Credit Investigation (CI) and require a higher income to get approved. - Pag-IBIG Fund (HDMF). This is the favorite option for first-time homebuyers and employees (whether in government or private sector). To qualify for a loan, you need to be an active member with at least 24 months of contributions.
Pros: They offer the longest payment terms (up to 30 years!). Longer terms make monthly amortization smaller and more affordable. They are also more lenient with credit history compared to banks.
Cons: Sometimes, processing time is slower than banks, and the loan amount is limited depending on your contribution size. - In-House Financing. This option skips the bank and the government because you pay directly to the real estate developer. Essentially, the developer acts as your lender.
Pros: This is the easiest to apply for. Almost no paperwork and minimal credit investigation. As long as you’ve made the down payment, you’re often “approved” right away.
Cons: The catch? Very high interest rates (often 12% to 18%, compared to 6–8% from banks). Payment terms are also shorter, usually only 5 to 10 years.
A Mindset Shift
For a long time, I believed that taking on debt meant failure or poor financial decisions. But this journey taught me otherwise. Not all debt is bad; when used wisely, debt can be a tool that opens doors earlier than waiting for “perfect” financial readiness. A housing loan, in particular, is a form of long-term commitment that allows ordinary earners to secure shelter, stability, and a place to grow, while paying gradually over time.
This part of the series walks through the actual steps I took, from application to approval, so you’ll know what to expect if you decide to take this path yourself.
10 Essential Steps for a Successful Home Loan Application
1. Check If You’re Financially Ready
Before applying for a home loan, assess your financial health. Lenders want to know if you can consistently repay for the next 15–30 years. Start by reviewing your income, whether you have a stable job, a business, or work as an OFW. Calculate your debt-to-income ratio to ensure your existing obligations don’t overwhelm your budget. Check your credit history and settle any unpaid credit card bills. Prepare for the down payment, which typically ranges from 10–30% of the property price. As a rule of thumb, your monthly loan payment should not exceed 30–40% of your gross monthly income.
I’ve always believed that no one will ever feel completely “financially ready” to buy a house because the longer you wait, the more property prices appreciate. That said, I don’t mean taking risks blindly. After assessing my finances and mustering the courage, I decided it was time to move forward. Since I chose a pre-selling unit, I didn’t have to personally apply for a home loan with banks or Pag-IBIG. The developer assisted me throughout the process and only asked me to fill out forms for three banks: Security Bank, BDO, and Metrobank. They endorsed my application to these banks on the 8th month of my equity payment, when the unit was nearing completion. This timing ensured that the home loan would be released just as my equity was fully paid and the unit was ready for turnover.
2. Choose Where to Apply
Next, decide which financing option suits you best. Banks often offer competitive rates for those with good credit, while Pag-IBIG Fund is a popular choice for first-time buyers because of its lower interest rates and longer terms. In-house financing through developers is usually easier to get approved but comes with higher interest rates. Each option varies in interest rates, loan terms, approval speed, and documentation requirements, so weigh the pros and cons carefully.
I weighed the pros and cons of bank financing versus Pag-IBIG. After doing the math, I realized I could save hundreds of thousands in interest payments by going with a bank loan. Plus, I didn’t want a very long payment term. So, I opted for bank financing. The developer endorsed me to their three partner banks: Security Bank, Chinabank, and BDO.
3. Prepare the Required Documents
Once you’ve chosen your lender, gather the necessary documents. Most institutions require personal documents such as valid government-issued IDs, a marriage contract (if applicable), and proof of billing. For employed borrowers, prepare a Certificate of Employment, recent payslips, and your Income Tax Return (ITR). If you’re self-employed, you’ll need your business registration, Mayor’s Permit, ITR, and audited financial statements. Having these ready speeds up the process significantly.
Security Bank and BDO contacted me via email with a list of requirements. Both asked for a Certificate of Employment with Compensation (COEC), my latest three months’ payslips, employer’s contact details, a Letter of Authorization allowing the bank to conduct employment verification, and the filled-out home loan application form. Since I registered my sibling as my co-borrower, I submitted two sets of each document.
4. Submit the Loan Application
Fill out the forms and authorize the lender to perform a credit background check. Many banks now offer pre-qualification to tell you how much you can borrow before you commit.
After submitting the requirements, the waiting game began. During this period, the banks conducted property appraisals and credit investigations. I authorized them to perform a credit background check. For those wondering how this works: banks typically verify your credit history through credit bureaus like CIC (Credit Information Corporation) and check your payment behavior on existing loans or credit cards. They also confirm your employment details and income directly with your employer. If you are personally applying for loan, the process is similar, but you’ll need to coordinate directly with the bank for property appraisal and submit additional documents like the property title, tax declarations, and sometimes a building plan. BDO contacted me during this stage to confirm details about my loan, offered pre-qualification, and informed me how much I could borrow.
5. Property Appraisal
The lender will inspect the property to determine its market value. It is important to note that the loan amount is usually based on the lower value between the selling price and the appraised value. If the appraisal comes in low, you may need to pay a larger down payment.
Since this happened during the COVID-19 pandemic, I submitted all requirements via email. It took time to complete everything, and I even received a Notice of Default from the developer because of delays. Property appraisal is crucial because the loan amount is based on the lower value between the selling price and the appraised value. If the appraisal comes in low, you’ll need to pay a larger down payment or settle the loan difference. This is also one reason why some borrowers don’t get the full amount they applied for. Banks will only lend what they consider safe based on the property’s appraised value and your repayment capacity.
6. Credit Investigation and Evaluation
The lending institution will verify your employment and repayment capacity. This typically takes 2–6 weeks, depending on the institution and completeness of documents.
The banks verified my employment and repayment capacity during this stage, which typically takes 2–6 weeks. They check your credit history through the Credit Information Corporation (CIC) and confirm your income and employment details directly with your employer. In my case, I’m not sure if they contacted my employer because I never asked, and my employer didn’t mention anything. What I do know is that there was no need for a co-borrower because the bank found my salary and the monthly amortization amount sufficient for approval.
7. Loan Approval and Offer
Once your application is approved, the lender will issue a Letter of Guaranty (LOG) and/or Loan Approval Advice (LAA). These documents outline the approved loan amount, interest rate, loan term, monthly amortization, and any conditions such as insurance and additional fees. Take time to read every detail carefully before accepting the offer to ensure you understand the terms and obligations.
After almost two months of waiting, I received a Notice of Loan Approval via email. BDO was the first one of the two banks to approve my home loan application. The Total Contract Price (TCP) of my unit was ₱2,428,103.00 and I had paid 10% in equity over 18 months, leaving an outstanding balance of ₱2,185,292.70. However, I was only approved a loan amount of ₱2,063,000.00, leaving ₱122,292.70 loan difference. I chose a 20-year term with a 3-year fixed interest rate of 5.88%.
8. Pay Fees and Sign Legal Docs
Before the funds are released, you must settle processing fees, appraisal fees, notarial fees, mortgage registration, and insurance (MRI and Fire Insurance). You will then sign the Loan Agreement, Real Estate Mortgage (REM), and, in many cases, the Deed of Absolute Sale (DOAS) and Deed of Reconveyance.
📌 Loan Agreement – A contract between you and the lender outlining the terms of the loan, including interest rate, payment schedule, and obligations.
📌 Real Estate Mortgage (REM) – A legal document that places your property as collateral for the loan. The lender holds the title until the loan is fully paid.
📌 Deed of Absolute Sale (DOAS) – Transfers full ownership of the property from the seller to you. Essential for title transfer.
📌 Deed of Reconveyance – Issued after you fully pay the loan, reconveying the property title back to you and removing the lender’s claim.
Keep in mind that the bank will hold the property title as collateral until the loan is fully paid. For those who process their loan personally, you’ll also need to register these documents with the Registry of Deeds and pay documentary stamp tax, transfer tax, and registration fees.
Two weeks after receiving the notice, I was scheduled for a virtual loan signing, but it was rescheduled four times, which was frustrating and made me consider switching banks. Then, I brought the signed documents to the nearest BDO branch. I received an email confirming that the issuance of the Letter of Guaranty (LOG) and Loan Approval Advice (LAA) was in process. My loan approval was valid until April 11, 2022. I didn’t pay fees upfront; they were deducted from my loan amount, but I was asked to settle the loan difference before the loan take-out. I was given the option to pay it one-time or add it my monthly amortization payable by 9 months. I chose to pay it in one-time full payment.
9. Loan Take-Out
Once everything is complete, the lender releases the payment directly to the developer or seller.
On July 13, I received an email saying my loan release was being processed and would take 3–5 days. I went to BDO Corporate Office in Ortigas for a physical appearance before a notary public on July 14. The loan was released the same day.
10. Start Paying the Monthly Amortization
After the loan take-out, the monthly amortization officially starts. Congratulations! You’re now a homeowner with a long-term responsibility. Payments are usually auto-debited and you will be asked to set up an auto-debit arrangement. Late payments incur penalties. Consistency is key to maintaining your credit score and keeping your home secure.
I already had a BDO savings account, so setting up an auto-debit arrangement was easy. My monthly amortization was ₱14,191.11 and I was given a lower interest rate of 5.5000 for 3 years because of their ongoing promo.
Timeline of My Housing Loan Application
- September 2021 – Developer endorsed my application to partner banks for home loan processing
- November 8, 2021 – BDO approved my home loan application
- November 22, 2021 – Initial virtual loan signing scheduled (rescheduled four times)
- February 10, 2022 – Successful virtual loan signing with BDO
- February 11, 2022 – Signed documents forwarded to the nearest BDO branch
- February 21, 2022 – Issuance of Letter of Guaranty (LOG) and Loan Approval Advice (LAA)
- July 1, 2022 – Paid loan difference and signed the Deed of Absolute Sale (DOAS) and Deed of Reconveyance
- July 14, 2022 – Appeared before a notary public at BDO Corporate Office; loan released to the developer on the same day
- August 13, 2022 – Started monthly amortization under a 3-year fixed term.
The Emotional Side of Home Buying
Looking back, the most difficult part of this journey wasn’t choosing a house, it was waiting. Waiting for approvals, waiting for updates, waiting for emails and signatures that kept getting rescheduled. There were moments when the process felt longer and heavier than I expected, and times when I questioned if this was really meant to happen. The emotional weight of uncertainty was heavier than the paperwork itself.
This season taught me that faith doesn’t replace planning; it works alongside it. You pray, you prepare, and then you wait. And while waiting is uncomfortable, it is often where growth happens. If you’re in the middle of your own house hunt or loan application right now, know that feeling anxious doesn’t mean you’re failing, it means you care.
The process is long and requires a lot of patience, but seeing those keys in your hand makes every bit of paperwork worth it!
Next: Part 3: The House Turn Over →
