Dear banks...

Here's an open letter to banks in the Philippines. If you work for the loans department of a bank, you may want to read this...

It takes 1 to 1.5 months between the loan application (LA) and the release of the Letter of Guarantee. And this turns off sellers. If you wish to grow your loan books, a solution you could come up with is a "pre-approval."

When loan-backed buyers make an offer for a property, usually, they still haven't initiated the LA process. This poses a dilemma for paying earnest money and securing the deal.

If they choose to pay earnest money (to reserve the property), they risk forfeiting it since they don't know whether they will get approved or can afford the monthly amortization. Whenever the LA or their target monthly amortization doesn't get approved, they try applying with other banks. This additional step would lengthen the purchase process and turn off sellers.

If the buyer is aware of the possibility that they won't be granted their target monthly amortization, they choose not to pay earnest money. The risk here is that a cash buyer may come in and steal the purchase. I've experienced this thrice in the past year.

So, why not develop a pre-approval solution where buyers may apply for a loan even before finding a property to purchase? The buyer may submit the required documents to know whether or not they can afford the monthly amortization.

I know what you're about to say: "We can't since we still have to appraise the property."

Then why not appraise properties and develop a pre-approved table of values for hot properties (e.g., Nuvali lots)? Giving buyers an idea of whether or not they'll be able to afford a loan-backed purchase will be truly useful. The rule "the monthly amortization should not be more than 60% of salary" just doesn't cut it.

You may charge buyers for this service. Anyway, it's the same amount buyers pay when applying for a loan.

This solution is similar to getting an LA approved but losing the property to another buyer. These buyers are more confident in paying the earnest money for another property in the same building/village because they know they were already approved.

Anyway, I'm just thinking out loud. The ideas here still need tweaking, but you get the point.