Most people have their own ideas of their dream houses. Furthermore, all of us long to have our very own place to call home. Although with the circumstances, not everyone can afford to buy one immediately. This is why our government came up with different ways on how Filipinos can get homes. One of which is by processing a home loan.
Before we dive into that topic, I want you to first understand what mortgage is. Mortgage is an instrument used by either purchasers of real estate investments to raise funds. On the other hand, existing property owners can also use it to raise funds for any purpose; this is done by putting a lien over the property being mortgaged. To give it to you simpler, it is when a property or real estate is used as a collateral. The borrower gets into an agreement with a lender (in most cases, it’s a bank). The borrower then receives cash upfront and pays the amount agreed upon in a certain span of time.
What is the importance of mortgages?
Mortgages are a good leverage for people and institutions who are looking to acquire certain property/ies or real estate and does not have enough funds to do it. For example, you want to buy a house and you do not have enough money to pay for the upfront cost, that’s the time you’d want to mortgage.
Both the borrowers and lenders take risks in entering this agreement; lenders take the risk of granting these loans because they do not have the guarantee that the borrower would be able to pay. On the other hand, borrowers also take the risk of accepting these loans because failure to comply would mean total loss of their asset.
What is the process of mortgage house/home loans?
Like any other, the mortgage process is also quite confusing. In this article, we will be showing you the process of home mortgage loans.
Step 1: Pre-qualification
This stage is the meet-and-greet that some might call. This stage can make or break the situation. Pre-qualification is fairly simple; this is the part where the borrower meets the lender (over the phone, internet, or physical). This is the time when information about assets, liabilities, properties gets thrown out. This stage does not only show your capacity to pay but your willingness with the process as well.
Basing it in the pre-qualification period, the lender will then estimate how much money you can borrow. The process is informal so it’s best to meet up with a lender in your own time.
Step 2: Initial payment and mortgage lock
Within the agreement you have with the lender, it’s essential to know exactly how much a borrower is willing to use as the initial/down payment. This would be a leverage as to how you will be paying monthly premiums with the residential entity you’re acquiring. Factors would be how big the land or the establishment is, its location, etc.
Another thing that you or borrowers need to understand is the mortgage lock-in period. To enlighten you with it, the mortgage lock-in period is a fixed number of days most often 30 or 60 in which the interest rate promised on a pending mortgage loan cannot be modified. In order for you to ensure that you’ll be paying the amount you were quoted, you can expedite to lock-in your rate by settling an upfront fee.
Step 3: Loan application
Of course as to almost all applications, you will be filling out a form. This form will ask detailed personal information about you and the house/real estate you are looking to acquire. It is in this process that the lender will present a Loan Estimate which outlines the closing estimates for the loan.
Step 4: Processing, Appraisals, and Approval
In this process, the lender will then finalize all of the information needed for them to process the loan. Furthermore, the value of your property will be appraised to determine the value; appraiser/s will also visit the place and will give considerable factors as regards the value of the property.
This one is when borrowers will be excited about because this will determine if the loan gets approved or not. The lender will go back-to-back with the information given and will do certain background investigations and credit checks upon you. They will also view your credit report to determine the level of risk of them lending you money.
Step 5: Escrow and Closing
Escrow is an agreement in which a third party entity receives and distributes funds and documents correlating to the mortgage. This is also the time when several paperwork is done and distributed. Also, it is during this phase when the title exam will be held. A title exam ensures that the title to the properly is clear and without errors.
After all the checking, investigations, confirmations, and evaluations, documents will be sent to a title company or attorney’s office (escrow) for the buyer and seller to sign. Morevoer, additional down payment and closing costs will be due at this time. These costs usually include:
- Appraisal fees
- Title exam
- Settlement fees
- Insurance of the title
- Credit report fees
- Application fees
When all there is is completed and everything was verified, the buyers can now take full responsibility of the real estate they have bought.
Although at first, it is a struggle to understand every detail of the process, if you’re going to be the one who will buy or sell, you’ll eventually get the hang of it. It only sounds complicated but it’s just under common sense, trust me. So now that you know the process of mortgage loans, you can either try or spread the word to let your fellow Filipinos know.
- How to avail Home Development Fund (Pag-IBIG)–Calamity Loan
- How to Apply Pag-IBIG Fund Housing Loan Online
- How to apply for SSS Housing Loan for Repairs and/or Improvements