As part of the mortgage planning process, you must also know how much you can afford to pay for the instalment each month. If it’s within your affordability, by all means you can buy. Before you submit your financial documents to the banks and also have a better chance on loan approval, it is paramount that you adhere to the rules in loan application.
1. Documents submitted
Submit what the bank wants. Different banks have different approval criteria. Too little or too many documents for in your loan application can cause your application to be rejected.
2. Do not Panic
A typical loan applicant will photocopy several sets of his documents to be submitted to multiple banks for approval after his loan is rejected by a bank. Every bank has different approval criterias. A loan rejected by 1 bank does not necessarily mean that other banks will reject your loan as well. You will need to shop around to find a bank that suits your document and your DSR*.
*DSR = Debt Service Ratio.
3. Do not accumulate bad debts
Good debts are debts that can generate returns to you which in turn can reduce your DSR. Bad debts on the other hand will make you worse off for example credit cards and personal loan.
4. Loan guarantor is a killer
Remember not to simply allow others to use your name as a guarantor as your future plans will be affected when the main borrower goes into bankruptcy.
5. Choosing the right banker
Some banker may tell you that your loan is 100% guaranteed for approval and you should take their word for it. There is no such thing as ‘guarantee’ if you sign the dotted lines of the loan facility.
This article is a summarized excerpt taken from the BLT – Bank, Law and Tax book of Property Investment. To read more, get a copy of BLT Property Investment by Richard Oon, Miichael Yeoh and Chris Tan available at bookstores near you.