How to Determine Your Affordability for a Housing Loan

Applying for a housing loan without knowing how much you can really afford is risky—it could lead to loan rejection, delayed approvals, or financial stress down the line. This guide walks you through the exact steps to assess your loan affordability before you apply.

✅ Step 1: Know Your Monthly Income

• Include all sources:

• Salary (net of taxes and deductions)

• Freelance or side business income

• Spouse or co-borrower’s income

• Remittances (if OFW support is regular)

📌 Example:

You earn ₱35,000/month

Spouse earns ₱25,000/month

→ Combined income: ₱60,000/month

✅ Step 2: Calculate Your Debt-to-Income Ratio (DTI)

• Banks and Pag-IBIG want your total loan obligations to stay below 30%–40% of your monthly income.

• Formula:

  📌 Affordable Monthly Loan Payment = Monthly Income × 0.30 to 0.40

• Example:

  ₱60,000 × 0.30 = ₱18,000 (safe maximum monthly amortization)

• 💡 If your existing debts (credit cards, car loan) already eat up ₱10,000, you only have ₱8,000 left for housing loan amortization.

✅ Step 3: Use a Loan Calculator to Estimate Loanable Amount

Based on your monthly capacity and desired loan term (e.g., 20 years), you can estimate how much you can borrow.

📊 Estimated loanable amount based on amortization:

Monthly Capacity Approx. Loanable Amount (20 yrs @ 7%)

₱10,000 ₱1.2M – ₱1.4M

₱15,000 ₱1.8M – ₱2.2M

₱20,000 ₱2.4M – ₱2.9M

Use Pag-IBIG or bank loan calculators for more accurate estimates.

✅ Step 4: Check Your Loan Eligibility

For Pag-IBIG:

• At least 24 months contribution

• Proof of income (payslips, COE, ITR)

• Age 65 or below at loan maturity

• No existing Pag-IBIG defaulted loan

  
  

For Banks:

• Stable income source (preferably employed or registered business)

• Good credit score

• Government IDs and financial documents

• May require higher gross income

✅ Step 5: Consider Required Equity or Down Payment

Most lenders require 10%–30% down payment.

Example:

House price: ₱2M

Down payment (20%): ₱400,000

Loan needed: ₱1.6M

💡 If you don’t have enough for down payment, consider saving first or applying for a Pag-IBIG Affordable Housing Program.

✅ Step 6: Factor in Other Homeownership Costs

Beyond your monthly amortization, consider:

• 🔌 Utilities (water, electricity)

• 🏠 Insurance & property tax

• 🧱 Repairs & maintenance

• 🧾 Permit processing (if building)

📌 Real affordability means being able to pay the loan + still live comfortably.

✅ Step 7: Get Prequalified or Pre-Assessed

Before committing, request prequalification from:

Pag-IBIG: Housing Loan Pre-Evaluation via Virtual Pag-IBIG

Banks: Loan officers can give quick pre-assessment based on your income and documents

✅ This gives you clarity before you make property or construction commitments.

🧮 Summary Checklist: Are You Ready?

✅ Stable monthly income

✅ Low existing debt (below 40% DTI)

✅ Enough savings for down payment

✅ Valid IDs and complete documents

✅ Good credit score

✅ Realistic property goal within your budget

Knowing your loan affordability is the first step to building wisely—not just dreaming big but building smart.

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How to Determine Your Affordability for a Housing Loan