With the many available housing schemes such as the PR1MA Scheme, buying a house is no longer difficult. However, many people are still confused with loan application. This article will guide you through your actual eligibility to applying for a home loan.
1. Debt Servicing Ratio
First of all, the bank will check your debt servicing ratio (DSR) before deciding how much loan you are entitled. Do note that different banks have different ways to determine your DSR although you provide the same information to the banks.
2. Risk Profile
In addition, the bank will determine your creditworthiness based on your risk profile, which include your spending habits, job stability and etcetera. Your inability to pay off your bills or debts will be an important factor that deters you from securing a mortgage loan.
3. Property Value
As the properties in the property market are overpriced, banks will then need to engage with property valuators to further confirm the property that you are applying a bank loan is really worth the amount that you will be paying for. The reason for doing so is to allow the bank to resell your property and regain the money in case you are unable to pay for your bank loan.
4. Margin of Finance/Maximum Loan to Value Ratio
A loan to value (LTV) ratio is a number that is used to describe the size of the loan compared to the value of property securing the loan. Banks or lenders will use the LTV ratio to understand how risky the loan is and it is also commonly used by bank to decide whether to approve the bank loan or not.
The period for loan repayment is commonly up to 35 years, starting from the day your loan gets approved, or until the age of 65 years old, whichever that comes first. That being said, younger applicants in their 20s will stand a higher chance of securing a house loan from the bank as compared to applicants who are already in their 60s.
6. Number of Dependants
The number of dependants that you have will affect your loan eligibility as well. For example, if you have a wife and five children, your chances of securing a bank loan will be lower as compared to applicants with a wife and two children.
7. Joint Applicant(s)
Your joint applicant(s) matter a lot when it comes to the application of housing loan. The bank will check on his or her creditworthiness before they approve the house loan. In addition, your relationship with the joint applicant(s) is taken into consieration as well. Spouse, parents, and children will naturally have lesser disputes as compared to relationships with your friends or siblings.
In conclusion, these tips will increase your eligibility when it comes to applying for a home loan. Getting your home loan approved is not as daunting as it seems to be, as long as you start preparing and planning earlier.