Buying your first home. It’s exciting, something we all dream about, but how to make your dream a reality? It can all be a bit overwhelming.
When and where should I buy? How much cash will I need? How can I get the best loan? We like nothing more than helping you with tough questions, here are our top 5 first time buyer tips to help you get ahead:
1. Research First Find out if you're eligible for any housing grants. For example, significant CPF grants are available for first time EC buyers who are Singaporeans and have a partner who is either Singaporean or a permanent resident. However, these grants are not applicable to ECs bought from the open market.
2. Get A Credit Health Check Find out your credit standing with Credit Bureau Singapore. Bad debts or outstanding issues with a bank account, such as forgetting to pay credit card bills, will affect your credit standing – this is how much you can borrow, or whether you can borrow at all.
Banks make their decisions about suitability for home loans based on an applicant’s DSR (Debt Servicing Ratio), this measures personal income against overheads. Your DSR should be below 40%, so again, be careful about the extent of your car and personal loans or maxed out credit cards.
3. Do The Math Before you look at properties and set your heart on that perfect first time buy, work out your budget. Your loan repayment should be an achievable payment relative to your monthly income. Recent tightening of property loan rules are meant to ensure that monthly loan repayments by property buyers do not exceed 60 per cent of their income.
The good news is that your income should grow steadily making those monthly payments easier.
Think about not just the size but also the length of your proposed loan. Some mortgage experts advise against going for a loan tenure of more than 30 years. Also, remember that banks normally require the remaining lease on a property to be not less than 40 years upon loan maturity. You should be between 21 and 70 years old and draw a salary.
Research and include the additional costs involved when buying your first home – resale application, legal and valuation fees, and of course your cash down payment or deposit.
4. Location, Vocation, Education Get real about what and where your first-time buy should be. It should suit not just your immediate needs, but also tick the right boxes for the next 3-5 years. This may include your place of work or a study if you are working from home, schools your kids might attend, shopping and transportation routes that work for you.
5. Get Insured Most home loans require you to take out basic fire and structural insurance - however, this won't protect your home against burst pipes, theft or the headache of paying to replace valuable contents.
As with any major investment, forward thinking and intelligent planning are the keys to success and the earlier you start saving for your first home, the better. Saving a sizeable sum will open up wider options, like getting a bank rather than an HDB loan, or opting for a resale flat instead of balloting for a new one.