In the world of finance, credit is credibility and if your river of cash flow never dries up, then the proverbial dams built by financial institutions will no longer present themselves as obstacles in your path. Singapore is the bastion of economic progress in East Asia, but also happens to be one of the most expensive cities to live in worldwide.
It’s no wonder that any average Joe in Singapore can afford to purchase a property without tying themselves up in a meticulous long-term home loan and pushing the burden of debt well into their retirement years. And that’s if you are lucky enough to get a home loan sanctioned.
Financial institutions have become tremendously vigilant in their assessment of home loan applications ever since the global economic meltdown triggered by the sub prime mortgage crisis in the US. Therefore, a weak credit score, hordes of unpaid loan obligations and the lack of a steady stream of income can cripple your dreams before they even begin.
Loan officers are ruthlessly rational in their review of applications so your desperation is irrelevant when it comes to risking their profits of their business. So in case you find yourself on the losing end of a home loan appeal, don’t sit and mope around, follow these two simple steps
1. Beginning the Credit Score Rehabilitation
For Singaporeans who have been struck by the deadly bankruptcy malaise, presenting a letter of discharge is not sufficient to meet the requirements of your loan officer. You must stabilize your credit score and stay put for a few years before you can hope for a successful home loan application.
Local banks in Singapore are a lot more accommodating in regards to this waiting period compared to foreign banks; however, you should know the waiting period is rigid irrespective of how quickly you dispense with your current debts.
Anyone with a credit score classifying them below a B level will be looked upon as a liability by a bank. Fortunately, the path to rebuilding your credit score is pretty clear cut and easy to follow. All you need to do is make sure interest payment is a term that remains alien to you and timely credit card bill payment becomes second nature to you.
Although there may be alternative financial organizations that will forgive your bad credit and approve your home loan, this privilege comes at the cost of highly elevated interest rates that may cost you more in the long run than the time it would take for you to fix your credit score.
2. Optimizing Your DSR
An individual’s Debt Servicing Ratio (DSR) plays a crucial role in determining their eligibility for home loans. DSR essentially compares your income to your overheads. The vast majority of financial institutions have a well-defined DSR limit of 50%. Unfortunately, the DSR is a huge thorn in the side of self-employed individuals and businessmen who must deal with meticulous income declarations. As a result, such people ideally opt for banks that offer asset-based lending in order to circumvent this complexity.
In case your home loan application gets derailed by an unsatisfactory DSR, you must seek out an instant modification in the amount you want to borrow – the loan quantum. Therefore, your monthly loan payments will automatically be cut down to an affordable rate due to the drop in the loan amount you seek.
You can keep tweaking this amount until you hit the sweet spot for your DSR and restore it to a decent percentage. In a worst case scenario where you can’t even make the down payment for your home, you can either narrow your sights down to a cheaper property or extend the loan tenure along with shortening the loan quantum.
For more financial tips and tricks to optimize your financial lifestyle, visit imoney.sg and learn all the best moves to make with your money.
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