A 23-year old was telling me his problem a few days ago. He could not get his housing loan approved. He was earning an average of around RM3,500 for the past 6 months. Not too shabby for a 23-year old. He’s a real estate negotiator. How much do they earn when they are awesome? The price of the home he was buying was only RM125,000. He has even some Fixed Deposits to show the bank. Everything seems okay except that he started working in 2016 but because he was only earning RM1,000 plus, he did not summit his tax returns. He also does not own a credit card. To cut the story short, he applied to just ONE bank because his friend, the banker told him that his earnings would qualify him for the loan. Then, a few days later, he learnt that his loan was rejected. Reason? The bank does not know enough about him. Here are some other things we should take note of before we apply for any housing loans in the future.
Blacklisted property developer – Not every developer is loved by all banks. It is good to ask your banker this question before submitting your loan application.
Blacklisted / Not preferred property – Every bank have their own risk assessment. They do not usually lend to 100% of all the buyers of the same property. The risk might just be too high. Understanding this usually helps tremendously. Many times, the bank offering the lowest rates may hit their quota soonest and they may reject your application.
No income proof – The exact reason why my 23-year old friend was rejected. Remember, whether we get taxed or not, it is up to the tax department and not us. Plus, the banks need this official submission as actual proof.
Loan repayment delays – If you occasionally delay your payments of other loans, this will also affect your application. Stay prompt. Do direct debit so that you are ‘forced’ to pay first before you spend it on other things. Proceed to check your credit score by dropping by the AKPK offices. They have the CCRIS machines.
Income criteria unmet – This is Malaysia and not some advanced country which the banks are far more lenient. Here, if you earn RM3,000 you may not even get a RM1,500 loan approved. Well, banks look at your Debt Service Ratio for your ability to pay. They look at ALL your borrowings, not just the one you are currently applying. It differs from bank to bank but suffice to say, 70% is usually already the edge. Some banks may use a lower number…
Don’t try to falsify your documents – This is a serious offence. It will not lead to just rejection but also prosecution too.
Leasehold properties – Some banks stop lending when the property has just 30 years lease left. Some would lend you much lower than what you apply for when the lease is less than 60 years.
Tougher and Easier Banks – Please do ask your banker friends. They would be able to tell you. There are definitely banks which much more stringent than others. Some banks may have quota for commercial loans but for residential, they may be ‘full’…
You may even engage a mortgage broker for assistance. They could usually help with the loan application because they are very experienced with loan applications. Perhaps try miichaelyeoh.com for more information. Actually, one more way is to buy below what you could actually afford. For example, if your salary allows you to borrow up to RM500,000 but you are only applying for a RM400,000 loan, the chances of it being approved is much higher. Another thing to take note of is that credit cards are not necessarily bad! If you applied for one, the banks now have a record of your credit habits. As long as you pay promptly, that is usually a good sign for the banks. I sincerely believe a home is a need and everyone should strive to own their own roof. There’s nothing wrong to aim for government sponsored schemes too. All the best.
written on 5 Dec 2017
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