If you are thinking about owning your first home, you need to learn how to obtain a home loan.
Obtaining a home loan can be easy if you know what to do and get prepared for it.
First and foremost, it’s very important to consider all the reasons why your housing loan could be rejected.
There are certain factors, such as, bad credit score or low debt services (DSR) that can result in a home loan being rejected.
However, even if you comply with all the requirements, you may still be at risk of having your new residential property
financing rejected by the banks.
Here are the 5 most common reasons:
1. Wrong Bank
A very common reason your home loan is rejected is because you apply to the wrong bank.
Not all banks have the same policy. In fact, each bank has a different set of requirements.
Remember you may get your loans approved in one bank but may be rejected in another.
You have to do your research and ask your property developer in Penang the bank that is best for you to apply to.
Because if you apply to several banks at the same time, and they decline your application, the record sticks and the consequence may be that your future loan applications with other banks will be rejected as well.
Who would want to lend money to someone who has records of rejected loans?
All banks are different and have different risk appetites. So keep your Central Credit Reference Information System clean, so when you apply for a home loan, you will have the right profile.
Some of the reasons why the bank may reject your home loan application:
• Age requirement: too young to apply
• Income: not enough
• The bank does not offer financing on that new housing development or at that particular location.
• The bank has already maxed out their end financing line for that property or development.
So take your time to learn where to apply for your home loan so you don’t waste time by submitting to all the banks, which gives you a higher possibility of rejection.
Keep in mind that even if you manage to find a low-cost property, most banks are sceptical about giving out loans for properties below RM100,000.
Unfortunately, most banks are not willing to take the risk for the minimal interest earned.
If your housing loan is rejected by the banks because of the developer, it’s time to look out for a new housing development.
Remember most banks will check on the developer or seller to make sure they are not under bankruptcy. So if they are not able to pass the evaluation, you may not be able to complete the transaction.
This evaluation is to safeguard the bank and also you, from dealing with an unreliable developer.
Not all Penang property new projects are good for investment. You may find out no matter what you do, you are still unable to get a loan for properties in certain areas for several reasons.
For example, some locations may have slow movement of appreciation; some other areas are not favoured by lenders due to low marketability, occupancy, and increasing cases of auctions.
It’s very important to consider the status of the property title when deciding on a property, because it may be the reason why your home loan did not go through. This document shows the land registration number.
The property title starts with the master title under the developer, which later on will be split into individual landed properties or strata titles for non-landed properties.
Banks expect buyers of sub-sale properties to have these titles. If for any reason after 10 years, a property still does not have an individual or a strata title, most banks will reject the loan, and it will leave the buyers with very limited options when it comes to financing.
So, before deciding to buy your first home, it’s recommended to consider all the above factors so you can get your home loan approved without any problem.