Step-by-Step Guide to Obtaining a Mortgage to Purchase a Property in Singapore
This article discusses step-by-step process for getting a mortgage loan in Singapore
Whether you are setting out to buy your first property or are an experienced property investor, it makes sense to have a checklist you can refer to when seeking financing. This way you can make sure that you don’t skip anything that could be crucial to getting loan approval. This article will discuss the factors you need to consider as well as the steps that it takes to finally get the loan you need to close the deal.
Process for Getting a Mortgage Loan in Singapore
Getting an In-Principle Approval (IPA) or an Approval-in-Principle (AIP)
It’s important to know how much you will be able to borrow before going to the banks asking for a loan. An In-Principle Approval (IPA) or an Approval-in-Principle (AIP) tells you your borrowing capacity. These are non-binding approvals issued by one or more banks that are conditional in nature and usually valid for about 30 days.
Potential property buyers would be wise to determine the loan amount they qualify for before they commit to buying a specific property. However, it’s important to know that this amount may turn out to be different than the final amount you are actually approved for once your bank examines and processes your loan application.
Here’s the step-by-step process that most property buyers go through in order to get an IPA:
1. Lay the Groundwork
- Make a rough estimate of how much you can afford for monthly loan repayments.
- Define what type of property you are planning to purchase. Is it a private property or an HDB flat?
- Compare and contrast various mortgage packages and make a list of several that seem feasible for you. This will give you an idea of which banks to go to for your IPA.
- Determine whether you can meet the current Mortgage Servicing Ratio (MSR) before you commit to buying an EC or HDB. The MSR is that portion of the gross monthly income of the borrower that is used for repaying all their property loans. This would include the loan they’re currently applying for. The current cap on MSR is 30% of the applicant’s gross monthly income.
2. Submit Loan Applications to the Banks
- Using the list of banks that you compiled earlier, submit your loan applications asking for in-principle approval. To make this as easy as possible, submit your applications through Mortgage Partners of Pinnacle Estate Agency. You need to know that an IPA you get from one bank cannot be used to get a loan from another bank. This would require a separate application.
- Organize all the financial documents the bank will require. These would be: Histories of CPF contributions, paylips, credit card bills, and if you have any current housing loans, the paperwork on those would be required as well.
- Each bank offers their own loan packages: You will now be given information on various loan packages for your consideration. In the following section we will discuss various types of interest rates that banks offer for mortgage loans.
- This is when you sit back and wait while the banks you submitted an application to review it to evaluate your qualifications and determine how much money they could potentially lend you.
- In processing your applications, the banks will determine whether you meet their criteria. As part of their criteria, they will check what your Total Debt Servicing Ratio (TDSR) is and your Mortgage Servicing Ratio (MSR) if you are buying an HDB flat or an EC. They will also run a background check.
4. Getting an Answer
- You won’t have to wait long to find out whether your application has been approved, as it typically only takes three days to get approved for an IPA.
- Don’t forget that an IPA is non-binding. You are under no obligation to commit to that bank for a loan.
- Last but not least, the report you receive from the bank will only be valid for about 30 days.
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