Everyone’s goal is to own their own house. After all, it’s a significant life achievement and a long-term investment for themselves and the next generations. At the same time, purchasing a first home may require individuals to think a million times, as it is likely one of the most difficult and expensive purchases they will make in their lives. Additionally, the rising cost of living in Singapore is likely to make people feel less inclined to spend large sums of money on a home or even take out a loan to buy one.
However, if you’re still interested in buying a home, then go for it. However, this plan has to go through careful consideration or planning. One way to do that is to look at the signs to see if you are financially stable enough to take out a home loan.
You have a stable income
Money is integrally linked to everyone’s daily life. Individuals can secure (at least) a single, consistent source of employment or income that not only covers their basic needs but also allows for savings and investment. That is a sign that individuals can consider the next step in owning a large asset—a home.
On top of that, money lenders look over individuals’ eligibility for a home loan mostly based on their steady earnings and job stability. The more income-producing statistics they provide, as well as maintaining an employment history, the more money lenders can be certain that individuals are able to manage monthly mortgage payments without experiencing financial difficulty in the future. Making investments in an asset through a loan demands considerable commitment on the part of individuals, and money lenders don’t want to lose money on it.
You have good creditworthiness
The second factor that money lenders consider when evaluating people’s employment histories and sources of income is their creditworthiness. This can also help money lenders determine the interest rate that will be offered to individuals. An individual with multiple credit cards and extremely strong like 1,950 scores will typically outperform an individual with only one credit card and a fair score like 1,844.
Having a large number of credit accounts with impeccable histories indicates an individual’s ability to manage credit with integrity, making them a more appealing choice for money lenders to believe in. This may indicate that you are a dedicated borrower with high integrity to handle a home loan that requires ongoing commitment.
However, if an individual just has one, it isn’t going to stop them from continuing to take out home loans, and if they are still in the position of having an acceptable score, they can wait a few months to improve their score in order to show more responsible credit management and achieve better loan terms.
You can manage your DTI
This is calculated by comparing individuals’ monthly debt payments to their gross monthly income. Money lenders in Singapore want to develop relationships with individuals who have a DTI ratio of less than 36%, guaranteeing that they won’t overextend their finances.
You have adequate down payment money on hand
Although down payment requirements vary, in Singapore, individuals should have a down payment of at least 20% of the price of the home they are planning on buying. It can be paid in full through their CPF Savings/Ordinary Account (OA), either with cash or a mix of cash and loan.
However, those who took out a loan to afford it must also budget for closing costs, unexpected charges, and future homeownership expenses. Individuals are capable of getting a loan from a money lender if they explore the aforementioned factors and have a significant down payment and expenses behind them.
So, remember to do some research on how to do cost-effective homeownership expenses. Also, because owning a home encompasses more than just mortgage payments, you must plan your budget and keep track of other housing-related expenses that include insurance, maintenance fees, and property taxes. Do not exceed 30% of your gross monthly income to guarantee that you can repay the loan afterwards.
Capable of getting pre-approval from lenders and explaining your financial plan
The bottom line here is that potential homeowners must thoroughly determine their financial status before making an expenditure of this magnitude. One good way to do that is to go to a registered money lender to have their financial information reviewed before committing to a specific loan amount. After all, ninety per cent of real estate brokers or sellers prefer to work with pre-approved purchasers, indicating that they are willing to commit to financial trustworthiness.
And if you strongly believe that you meet the based on your financial situation, it’s going to be much easier to make your dream house a reality.
