To get an approval from bank, you first must understand the bank’s standard approval criteria.
Generally, bank will look at following criteria.
1) Borrower employment background
Bank will prefer if customer working in Multi National Company (MNC) and working for more than 2 years. It’s show stability in employment and income.
However, it doesn’t mean that if you are working in small company they do not keen. They will look at overall profile.
Generally, they will look into company you work with, income per month, years in the company and as well as position. Every little details mean something to the bank.
2) Credit Check Report
Generally, bank will do a credit check through CCRIS and CTOS Report to check on customer payment background and history.
CCRIS normally will provide significant information:
- How your payment look like in the pass 1 year
- How your credit standing look like
- How you make your payment
- How much your current borrowing
- Do you have any poor track record with other banks?
- Do you over use your credit cards?
- Do you have special attention account?
- Do you have apply any recent loan facilities?
For CTOS, this is more on heavy stuff.
For example, summon by the bank due to non-payment account, bankruptcy, or being guarantor to someone and defaulted, and sometimes the Telco companies will also list down the defaulter here.
The bank will review everything on the credit backgrounds. But, these 2 important reports are a must to use as a reference.
It is wise if a borrower to print the CCRIS report from bank Negara and CTOS report from CTOS Company before putting any booking on any house.
CCRIS report is FREE and CTOS report may have minimum charges. But, it is worth to be prepare this report before looking for any house.
You do not want to be caught in surprise later and lose all your deposit to seller.
3) Sufficient Income
Income is essential criteria to determine how much you can borrow.
Consistency of receiving income is crucial too. You must have monthly consistent income to proof. Normally, bank will request for latest 3-6 month payslips and bank statements to proof the consistency.
People who receive salary with commission / overtime / allowance will need to provide 6 month payslips and bank statements.
Bank will use 6 months to average up the amount and calculate the income.
Saving documents like Fixed deposit, Amanah Saham Berhad ( ASB), Tabung Haji , bond or any type of saving can help to support your application.
Most banks love people with saving, because people with saving have less tendency to default compare to people with no saving.
5) Property Location
You may have flawless credential with sufficient salary and good paymaster.
Then, without you know it, your home loan application rejected! Surprise and anxious, you do not know what happening?
Sometimes, it may be caused by your property location.
To be in realistic, not all property in Klang Valley can be a good for investment.
Some area, may have slow movement of appreciation or even because of history in landslide.
Banks do have every right to finance or not financing the property.
6) Land Tenure
Land tenure can be one of the factor banks not giving out loan too. While, freehold property will have less issue on this. For leasehold (with less than 60 years left) and Malay reserve land, purchaser sometime will stumble with difficulty of getting loan. Yes, not all the bank giving out financing for this type of property. You may have less choices.
Imagine this, if you have bought a leasehold property with balance 60 years expiry date.
After 15 years, you would like to refinance your property, at that time your balance lease is 45 years. Can you imagine any bank that would give you a loan for balance 45 years?
Or if you are selling the property, the new purchaser will have difficulty to obtain for a loan. If that the case, your property may not able to sell.
On top of that, there is a huge premium that you may need to pay later.
This fact is something for you to consider for future.
7) Title Deed
Generally, people may not even bother much on the title deed when purchasing a house.
But, if you are one of this people. Perhaps you should start to care about this.
Basically, title deed is a documents showing the land registration number. Just like birth certificate.
There are few title deed. Start with master title. Normally, when one purchase a house from developer, the property will be under master title.
For example, ABC SB developer develop a project name Tiara Heights. Tiara Heights may include development of double storey, condominiums, semi-d and bungalow.
All this development will be under one master title.
After project completion and years later, developer will request for a sub-divide on the land to individual title or strata title.
Individual title and strata title will shows every individual house have their own title number.
Individual title usually for landed property such as double storey, single storey, bungalow or Semi-D.
Strata title is for non-landed property such as condominium, apartment and town house.
Why all these important?
After certain years, the banks will expect a property to have their own individual or strata title. For the bank, this documents is very important to secure the property charge to them.
What happen if the property do not have a individual/strata title?
If a property do not have individual / strata title after 10 years and above, most banks may not want to finance the property. Perhaps, only 1-2 banks will do it, so you will have less choices of bank offer.
If you own a property like this, you will have a hard time to sell too because purchaser unable to get loan financing.
How to know whether the property have subdivide or not?
You can check with the property agent or seller. Or you can call the developer or call up the maintenance office. Someone, will know something. Before purchasing a house, you have to ask around or google online to get some information.
If the property is under master title and the developer no longer around due to bankruptcy. Again my advice, you may want to avoid this type of property. Not much bank will want to finance this property.
8) Seller background
Why is seller background important for my housing loan application?
Yes, it is important. It’s can be the reason why your housing loan application is rejected.
While, most banks will do a CTOS check on seller to make sure seller is not under bankruptcy.
If seller under bankruptcy, you are not able to complete the house purchase transaction.
So, don’t be upset when bank’s is rejecting your application because of this, actually the bank is helping you by prompting the customer.
While, if you have confident to comply the above and avoid the necessary, your housing loan application should be comfortably approve by the banks.
Until next article, thank you!
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