Housing Loan
When talking about a home purchase, there is no way to avoid talking about housing loan. (Unless of course, you’re loaded and you are planning to purchase with cash, in that case please skip this article!) A housing loan, also called home loan or home mortgage is simply a loan provided by a bank or any financial institution for the purchase of a residential property, be it for living or investment. In a housing loan, the home purchaser (borrower) will transfer the title to the financial institution (lender) on the condition that the title will be transferred back to the borrower once payment is complete and all terms of the mortgage agreement has been made.
Housing Loan For Your Dream House
A home loan is an essential tool that allows a greater number of people to own their own property as it does not require the purchaser to provide the full payment up front, an amount that is impossible for most people. If you have an existing house, and you are just thinking of using that house as collateral to obtain some cash loan, that is called refinancing loan. Of course, as home loans are usually a large sum of money, lenders such as banks will require insurance to avoid being exposed to high risks. So, apart from having the option to auction off default properties, they also screen all loan applications thoroughly and one of the most important parameters for a borrower is their Debt Service Ratio (DSR).
DSR can simply be represented as DSR = Total Commitments / Income, where commitments are monthly commitments to banks or other financial institutions such as personal loans, car loans and etc. As for income, it is your monthly income after statutory deductions such as taxes, EPF and SOCSO contributions. Generally, DSR should not go over 70% after including the loan you are applying for as banks would prefer that the borrower has sufficient financial buffers to protect them against delinquency or foreclosure due to various reasons. Different banks usually have differing methods of calculating an individual’s DSR, which is why sometimes a person can be rejected by a bank while get accepted by another.
Apart from DSR, housing loan applications can also be rejected due to being blacklisted on CTOS or CCRIS, both of which are credit rating systems that show an individual’s risk profile. A person’s credit is fundamentally based on the following 3 items, your attitude towards a previous loan or debt payments, a number of valuable assets you hold, and your ability to pay off debts, in essence, your income.
It is a devastating experience when you have done everything right and have found your dream house at a value way below the market value only to have your loan application rejected at the last minute due to a bad credit rating caused by previous bad financial decisions, a time when you were still unaware of these things. In these instances, you have to amend your previous mistakes and repair your financial problems as soon as possible so that your future applications may be approved.
Conclusion
A method one can consider is to seek out legal private lenders that are not as stringent as banks. You can borrow an amount sufficient to settle previous debts and obligations to improve your credit rating, but always remember to be extra cautious and only borrow from legal lenders. When used wisely, the money borrowed from private lenders can not only resolve your previous financial difficulties, it can also improve your future financial capabilities and even be used as means for getting renovation or relocation.
You may also be interested in the personal loan if you just needed some quick money to clear up your CTOS or CCRIS records, to enable you to borrow from the bank. Alternatively, do have a look at our other services: business loan and pawn loan.