Buying a home is often the most significant investment a Filipino will make. While many developers offer in-house financing, the Pag-IBIG Fund (Home Development Mutual Fund) remains the most popular choice for Filipinos due to its lower interest rates and extended repayment terms.
When purchasing a privately owned house (e.g., a "re-sale" property or a house built by an individual owner rather than a developer), the process differs slightly from buying a unit in a subdivision. This guide outlines the legal and procedural landscape of securing a Pag-IBIG Housing Loan for private residential property.
I. Eligibility Requirements
To qualify for a housing loan, the borrower must meet the following criteria under the Pag-IBIG Fund guidelines:
- Active Membership: At least 24 monthly mandatory savings (contributions).
- Age: Not more than 65 years old at the date of application and not more than 70 years old at the date of loan maturity.
- Capacity to Pay: A net take-home pay that complies with the Fund’s requirements after considering the monthly amortization.
- Legal Capacity: Must have the legal capacity to acquire and encumber real property.
- No Existing Defaults: No Pag-IBIG housing loan that was foreclosed, cancelled, or bought back.
II. The "Retail" vs. "Developer-Assisted" Distinction
When you buy from a private individual, the application is categorized as a Retail Loan. Unlike developer-assisted loans—where the developer handles the paperwork—in a retail loan, the buyer and seller are responsible for coordinating the documentation and title transfer.
III. Documentary Requirements
The success of the application hinges on the completeness of the "folders." You will typically need to prepare:
| Category | Key Documents |
|---|---|
| Identity | Valid IDs, Marriage Contract (if applicable), 1x1 Photos. |
| Income | For Employees: Certificate of Employment and Compensation (CEC), latest ITR, and 3 months' payslips. |
For Self-Employed: SEC/DTI Registration, Audited Financial Statements, and ITR. |
| Property Documents | Transfer Certificate of Title (TCT): Must be a certified true copy from the Registry of Deeds.
Tax Declaration: Latest copies for Land and Building.
Tax Clearance: Evidence that Real Property Taxes (RPT) are paid. |
| Contractual | Contract to Sell (CTS) or a Deed of Absolute Sale between the buyer and seller. |
IV. The Step-by-Step Legal Process
Verification of Title: Before paying a reservation fee, verify the title at the Registry of Deeds to ensure it is free from liens or encumbrances (e.g., it isn't already mortgaged to a bank).
Loan Application and Appraisal: Submit the Housing Loan Application (HLA) to Pag-IBIG. The Fund will send an appraiser to the property to determine its Loan-to-Appraisal Value.
Note: Pag-IBIG may not lend the full purchase price if the appraisal is lower than the selling price. The buyer must cover the difference (equity).
Notice of Approval (NOA) and Letter of Guaranty (LOG): If approved, Pag-IBIG issues an NOA. The NOA contains the conditions for the check release. The LOG is a document given to the seller, promising that Pag-IBIG will pay once the title is transferred to the buyer’s name.
Transfer of Title and Tax Declaration: The buyer must pay the Capital Gains Tax (CGT) and Documentary Stamp Tax (DST) to the BIR to get the Certificate Authorizing Registration (CAR). Then, the title is transferred to the buyer's name at the Registry of Deeds.
Annotation of Mortgage: The new title in the buyer's name must be annotated with the Pag-IBIG Mortgage.
Loan Release: Once the new title and tax declarations are submitted to Pag-IBIG, the Fund releases the check, usually payable to the seller.
V. Critical Costs to Consider
Beyond the monthly amortization, both parties must prepare for transaction costs:
- Capital Gains Tax (6%): Usually borne by the seller (based on selling price or zonal value).
- Documentary Stamp Tax (1.5%): Usually borne by the buyer.
- Transfer Tax and Registration Fees: Borne by the buyer (approx. 0.5% to 1%).
- Appraisal Fee: Paid to Pag-IBIG upon application.
VI. Common Pitfalls to Avoid
- Unpaid Real Property Tax: Pag-IBIG will not process loans for properties with tax arrears.
- Discrepancies in Documents: Ensure the name on the ID matches the name on the Title exactly.
- Expired Appraisal: Appraisals have a shelf life. If the title transfer takes too long, you may need a re-appraisal.
Buying a privately owned house using Pag-IBIG requires more "legwork" than buying from a developer, but it offers the freedom to choose unique properties and negotiate directly with owners.
Would you like me to create a checklist of the specific Bureau of Internal Revenue (BIR) forms needed to transfer a title in the Philippines?