The resale private property market in Singapore attracts many foreigners and Singapore Permanent Residents (SPRs), either as an investment or as homes now or in the future.
If you are interested in purchasing a valued residential property in this country, you should note that the mortgage approval process can be daunting to the newcomer to the property market.
Here we simplify things and show you how to get your mortgage application accepted quickly.
4 Ways Of Ensuring Mortgage Application Is Accepted Quickly
1. Do Your Preparation
Gather all the documentation that will be needed for your application. This includes certified copies of your identification document, three to six months’ pay slips indicating proof of income and employment, and details of all other sources of income, your fixed monthly expenses, and any assets or liabilities.
Look up your credit history. The bank will check this too and you want to be pre-warned of any bad credit that could affect your application.
Start saving for the down payment on your new property. If this is the first property you are buying in Singapore, you will need 25% of the purchase price in cash. Having some or all of this in savings will make banks more liable to offer you a loan. Should you have accumulated less than 20%, you will become liable for private mortgage insurance (PMI).
PMI is annual insurance that covers the bank in case you cannot repay the loan and works out to approximately half to one percent of the annual mortgage.
The bank will consider any current debt you have when deciding if, or how much, to loan you. Settle outstanding accounts and reduce the balances on your credit cards and other revolving debt. A student loan or car repayment will have less of an effect than the former items.
2. Prior to an In-Principle Approval
Determine what type of property in Singapore you are allowed to buy as there are restrictions on foreigners, including Singapore Permanent Residents (SPRs). Work out how much you can afford, based on your income and expenses.
Go through an estate agent for an HDB loan. You can check your HDB loan eligibility at PropertyGuru. Not only will they help you find your dream home, but they can help you navigate the whole process.
Compare the mortgage packages offered by different banks to see which ones could work for your circumstances. Shortlist potential institutions.
The Mortgage Servicing Ratio (MSR) provides a limit on the amount you can buy for. Currently, this is 30% of your gross monthly income and you will not be loaned beyond this so you must establish that ceiling and be sure that you can afford the repayment on a mortgage.
Above all, avoid making an Offer To Purchase (OTP) until you have secured a pre-approval (IPA). Bear in mind that banks may provide a pre-qualification figure initially and that this could change with their final approved loan.
Generally, the former is 90% likely to be unchanged while the latter occurs before a thorough review of your financial situation and just helps you to start considering properties. A bad credit record could change this amount substantially or result in the bank not agreeing to lend you the money at all. As not all banks provide both, always check which one you have been given.
3. The Importance of an IPA
Taking a pre-qualification as an IPA has the potential to cost you a lot of money if you make an OTP. If you see a property you like and put in an OTP, you will be required to pay one percent of the purchase price. If you do this on the strength of a pre-qualification and later are not approved for a loan, you may have difficulty recovering that money.
On the other hand, an IPA is necessary, for several reasons. Firstly, it allows you to make a wide search for properties you will be able to afford, giving you greater choice. Secondly, estate agents will be more likely to make the effort to help you find a property as it shows you are serious. Thirdly, having an approved amount gives you bargaining power. Finally, it speeds up the process.
4. Getting In-Principle Approval
Use your shortlist of potential banks whose mortgage packages suited you. Remember that you will have to do a separate process with each bank, including filing all your documentation.
Each bank will go through its own background vetting process, check your credit records, and assess your affordability before providing an IPA. They will check your Total Debt Servicing Ratio (TDSR) to buy private property, your MSR for an HDB property, and your loan-to-value ratio.
If the latter exceeds 80%, your application will have to go through a private mortgage insurer as well, which will add several days to processing your application.
Overall, the whole approval process will take a couple of weeks to two months before a mortgage is offered. However, an IPA will only take a few days and the certificate is valid for a month. Ask the shortlisted banks about their turnaround time if you need to move soon from your current premises.
Once all this has been done, you can make an Offer To Purchase.