If you’re planning to buy a house, chances are your finances are at the top of your considerations. Of course, you want to make sure that you can pay for the property you want, so wouldn’t it be nice to have lending institutions tell you whether you can obtain a loan?
Fortunately, you can pre-qualify for a home loan or mortgage. Pre-qualification is a simple process through which you can determine whether you might be able to secure a loan in the future. Depending on the lender, you might also be able to see which loans might be suited to your needs.
What is pre-qualification?
Pre-qualification is a quick and easy process to test whether the bank of your choice can give you a home loan based on your financial information, the total contract price of the property you want to buy (or are already buying), and your desired loan terms.
Take note that pre-qualification is not a guarantee that you will be able to secure a home loan. Your financial standing, employment, bank requirements, and other circumstances could change between the time you got pre-qualified and the time you actually applied for a loan, so don’t treat it as gospel truth. Instead, it merely indicates the likelihood of getting approved for a loan based on the information you provided. Nevertheless, it’s a good tool to help you approach your home purchase more realistically.
In the same vein, pre-qualification is not synonymous with pre-approval, a term you might have come across while researching loans. Pre-qualification is a simple test of your eligibility to obtain a loan, whereas pre-approval is a more thorough process that ends with a formal document from the lender stating how much you can borrow, plus the applicable interest rate.
|An important note: Many banks in the Philippines offer pre-qualification tests, but most of them do not say whether they offer pre-approvals. Do get in touch with your preferred lenders if you’re interested in going a step above pre-qualification.|
While pre-qualification only involves entering your information on a form, pre-approval requires you to submit your financial documents so that the bank could check your creditworthiness; a bank representative may also call you to verify the information you provided. In other words, pre-approval is a more demanding process that can give you a more concrete idea of your loan options.
Do remember, though, that pre-approval is not the same as approval. When the time comes, you still have to apply for a loan, but you’ll be at an advantage if you had been pre-approved.
How to get pre-qualified
It is very easy to get pre-qualified. Just go to the website of the bank you prefer and find the home loan section, where you will see an option to take a pre-qualification quiz. If it’s not available, you can try reaching out to the bank to see how you can get assessed.
In general, you will need to provide the following information:
- Personal information (e.g. name, age, contact details, civil status, residential status)
- Employment information (e.g. type of employment, tenure, gross monthly/annual salary)
- Co-borrower information, if applicable
- Home loan information (e.g. loan purpose, desired loan terms, the deposit you put down)
- Whether you have a credit card and/or other loans
For reference, you may check out the pre-qualification tests of BDO and Security Bank. BPI has a simpler self-assessment questionnaire that you can also try. More casually, you can use these banks’ home loan calculators to get an idea of how much your monthly payments will be by adjusting variables like the loanable amount, the loan tenure, the interest rate, and the fixing period. Check out the definitions of different loan-related terms here.
Some banks will give you the results right away, while some will take a few days. For example, Security Bank just says “Congratulations! You are pre-qualified for a home loan” once you have completed the quiz; it then invites you to submit a loan application.
BDO, on the other hand, has a window of three banking days within which a bank representative will reach out to you to provide the details of the loan you may qualify for, if any. If you pre-qualify, BDO will email you an “indicative interest rate” and a fixing period, plus several scenarios that each include a different loan amount, loan tenure and monthly amortization. The loan “offer,” valid for a certain period of time, as we’ve discussed, does not guarantee that your home loan application will be approved.
Alternatively, you may try filling out the pre-qualification forms for third-party services, which will give you a list of loan options across different banks based on the financial information you provided.
Why get pre-qualified?
Getting pre-qualified for a home loan is a good idea when you’re starting to get serious about buying a property. It will take just a few minutes of your time and will give you an honest, fact-based determination of your chances of getting approved for a loan down the line.
If you get pre-qualified based on your current financial standing, great! You can relax a little with the understanding that there is a loan out there that may work for you. If, on the other hand, you learn that you don’t make the cut just yet, you can use that knowledge to take stock of your financial and employment situation, work toward making the appropriate changes, or perhaps postpone buying your dream house to a later time.
In any case, pre-qualification is a great way to frame your mindset. It’s an easy, straightforward process that we recommend you do before embarking on your home-buying journey.
Maria Papa is a senior property and finance expert specialising in home loans, investment loans, and self-employed loans. If you have questions, you can email Maria at firstname.lastname@example.org.
Disclaimer: Your full financial situation will need to be reviewed prior to acceptance of any offer or product.