You need to provide the following basic documents before the financial institution
can process your loan application:

• A photocopy of identity card or passport
• Your latest 3 months’ salary slip
• Your latest income tax return form (form J)
or EA form
• Sale and Purchase Agreement/deposit or booking receipt/letter of offer from the
housing developer
• A photocopy of the land title (if any)
• The latest bank statements (compulsory in the absence of salary slips and/or Form J/EA Form) dating back six months/savings passbook/fixed deposits
• Valuation report for completed houses and/or

Some financial institutions may require

Additional supporting documents

• If you are self-employed, you need to provide your business registration documents, latest 3 months bank statements, latest financial statements and other supporting documents to support your income However, some financial institutions may require additional supporting documents.

Upon acceptance of the letter of offer, you will need to appoint a lawyer to draw up the loan documentation for you. Normally, you would select your lawyer from a list of panel lawyers provided by your financial institution. Some of these documents need to be submitted to the relevant government authorities for registration and to the Stamp Office for stamping.

Upon completion of the above, these registered documents are then submitted
to the financial institution and you will be given a copy of the Loan Agreement.
In general, the timeframe for the completion of this legal process should not exceed 6 months.

ASSESING YOUR LOAN REPAYMENT CAPACITY

A common criterion is that your monthly loan instalment repayment should not be
more than 1/3 of your gross monthly household income. If you have savings or
fixed deposits, they can be used to support your loan application as financial
institutions may take them into account in evaluating your eligibility.

Different financial institutions have different criteria in calculating the repayment capacity. In the case of a floating rate loan, you should also note that your monthly repayment may increase substantially when interest rates go up.

For example, when there is an increase in the Base Lending Rate (BLR), the interest rate on your loan will also go up, and your repayment would be higher. However, in most cases, financial institutions would allow you to pay the fixed amount of monthly repayment throughout the loan tenure and would make any adjustment caused by the variation in interest rate by increasing or shortening the loan tenure. You should check this out with your financial institution.

MARGIN OF FINANCING

The amount of financing provided by a financial institution depends on the market
value (for completed properties only) or purchase price of the house, whichever is lower. The margin of financing could go as high as 95% of the value of the house.

It is assessed on factors such as:

LOAN TENURE

The length of a loan can range anytime up to 30 years or until the borrower
reaches age 65 (or any other age as determined by the financial institution),
whichever is earlier.
• Type of property
• Location of property
• Age of the borrower
• Income of the borrower

LOAN FEATURES

Each financial institution packages its housing loans differently. You should
examine all the features of a loan package and not just base your decision on any single feature. Pricing is just one consideration; other features like flexible
repayment terms could balance the scale or even translate into greater loan savings.

Financial institutions generally offer housing loan packages either in the form
of a term loan, overdraft, or a combination of a term loan and overdraft.

COMMON HOUSING LOAN PACKAGES
OFFERED BY FINANCIAL INSTITUTIONS

• Term Loan
– A facility with regular predetermined monthly instalments. Instalment is fixed
for period of time, say 30 years
– Instalment payment consists of the loan amount plus the interest
• Overdraft facility
– A facility with credit line granted based on predetermined limit
– No fixed monthly instalments as the interest is calculated based on daily
outstanding balance
– Allows flexibility to repay the loan anytime and freedom to re-use the money
– Interest charged is generally higher than the term loan
• Term loan and overdraft combined
– A facility that combines Term Loan and Overdraft. For example, 70% as term
loan and 30% as Overdraft
– Regular loan instalment on the term loan portion is required
– Flexibility on the repayment of overdraft portion

DAILY RESTS VS MONTHLY RESTS

Financial institutions may charge you interest either on daily rests or monthly
rests depending upon the products offered. In the case of daily rests, the loan interest is calculated on a daily basis, while in the case of monthly rests, interest is calculated once a month based on the previous month’s balance. Under both types of loan, the principal sum immediately reduces every time a loan instalment is made.

GRADUATED PAYMENT SCHEME

A graduated payment scheme allows lower instalment payments at the beginning of the loan but this will gradually increase over time. This type of payment scheme will help house buyers to reduce burden of loan repayment for the first few years and allow them to allocate more money for other purposes. Over time, as earnings of house buyers increase, their repayment capabilities will also increase thus allowing higher repayment instalments at a later stage.

( Sources from Bankinginfo. )