You’ve been window-shopping your property – visiting sales galleries and even walking around certain neighborhoods to get a sense of the environment you want to make your forever home in.
When you find it, your real estate agent helps you apply for your home loan. A few days later, your agent informs you that your request has been rejected by the bank.
You start to wonder why.
This is a common scenario among homebuyers. Let’s find out what the possible reasons are so that you can increase your chances of success in your next job applications. One thing is certain, your salary is not the only thing that determines your eligibility.
Here are some of the contributing factors:
Debt service ratio (RSD)
The DSR is a formula used by banks to determine if you are able to repay the loan you are requesting. They measure your financial capacity based on the commitments you have in relation to your income. These commitments include your monthly obligations such as loans, bills, etc.
RSD = [Commitment/Income] x100
Some banks will consider your gross monthly income while others will only consider your net monthly income. For the net salary, it is after deduction of your EPF and Socso and other contributions.
Once you get the number, you can assess your position. Usually the acceptable rate from banks to lenders is around 65% to 70%.
Most of the time, banks refer to your credit score to assess whether your balance sheet is healthy. You can find out the health of your own credit score with CCRIS and CTOS.
For CCRIS, you can request a copy of your report from Bank Negara Malaysia (BNM) head office or regional offices by post, email, fax or online through the eCCRIS service. However, you will need to register in person at any BNM branch before using it. After that, you can access it anytime.
On the other hand, your CTOS report is easily accessible online.
Besides the credit score, banks will also check if you pay your bills and loans on time. On this aspect, it is indeed a disadvantage if you do not have other loans. These will appear as red flags for banks as they are unable to assess your repayment habits. Therefore, it is advisable to have at least one credit card to start building your credit reports.
If you’re unable to pay a home loan on your own, it’s a good idea to have another family member share the responsibility for paying off the loan. This can help increase your chances of getting your loan, but keep in mind that banks will also assess the credibility of your co-borrower.
In addition to this, they will also assess the relationship between the lead applicant and the co-applicant, even weighing the possibility of fallout in the relationship. The three types of joint borrowers are married couples, siblings, and friends. The strength of the bond and trust between the co-borrowers is important for the bank.
It’s no secret that earners on fixed incomes have a better chance of getting their loan approved because they can better gauge the applicant’s consistency in servicing the loan compared to those who don’t. fixed income.
For those who are self-employed, here are some steps you can take to increase your loan application approval:
- Maintain organized financial records
- Open a checking account
- Make consistent contributions to EPF
- Obtain a guarantor with solid financial experience
- Maintain a healthy credit history
Finally, what is your relationship with the banks? Be sure to do these to avoid being blacklisted by a bank:
- Pay all your bills on time.
- Make sure your credits are within reasonable limits. Avoid applying for multiple credit cards and don’t spend beyond your means.
Do your due diligence
You can use EdgeProp.my’s LoanCheck at https://www.edgeprop.my/loancheck to find out the maximum amount you can borrow before you go house hunting.
Other than that, be ready with enough money to pay hidden costs such as down payment, appraisal fees, documentation fees, legal fees and stamp duty on the home loan.
Some banks may provide an additional margin of up to 5% for insurance coverage of your loans, such as reduced term mortgage insurance (MRTA) or fixed term mortgage insurance (MLTA), and 2% for legal fees to help fund your appraisal and documentation costs. .
To get an idea of how much they cost, here is a standard guide: