Questions for homebuyers: Will the bank approve my home loan? How much will the approved home loan amount be?
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Many people think that income will indirectly affect the loan application, but it is not the only factor in determining the maximum home loan amount. So let’s find out what are the important factors!
a. Applicant's Other Loan Burden
- The bank will use the ratio of contribution to income (DSR – Debt Service Ratio) as the calculation, and the calculation standard of most banks is 70%.
- For example, the bank will calculate your repayment ability based on 70% of your net income (after deducting provident fund and tax returns), and then deduct your other monthly loan payments, and then determine the amount of your housing loan.
b. Credit Limits, Credit Scores & Credit Reports
- The bank has a score for your credit limit, the highest is 5 points, and usually employers and office workers will maintain an average score of 3 to 4.
- The credit limit is based on whether you pay your other loans on time each month. Examples of other contributions are car loans, credit cards, etc.
- The next step is to check your credit score (CTOS), and the scoring criteria are: 45% for instant payment, 20% for the total amount owed, 70% for credit history, 14% for credit structure, and 14% for new loans.
- If you are interested in knowing your credit score, you can check your CTOS online at https://ctoscredit.com.my/.
- The personal financial credit report (CCRIS) will also record your 12-month repayment behaviour, updated on the 15th of each month, and grasp whether you have paid the loan within the specified period, or failed to apply for a loan within 12 months or track record of success. If you have non-performing loans (Non Performing Loan – NPL) or have undergone debt restructuring, these records are classified as “special attention accounts”.
- You can also check your Personal Financial Credit Report (CCRIS) at http://eccris.bnm.gov.my/.
c. Tax Return
- Whether you file your taxes on time is also a factor in determining the amount of your mortgage.
d. Submit the relevant documents required by the bank
- Before the bank approves the loan, it will have a detailed understanding of the applicant’s background.
- Therefore, applicants will be required to submit necessary and relevant documents to assist in the review.
e. The Difference Between Applying for a Residential/Commercial Real Estate Loan
- for a loan of up to 90%
- According to the short-term economic recovery plan launched by Malaysia, individuals who buy a third house before May 31, 2021 will also have the opportunity to apply for a loan of up to 90% (70% in previous years).
- If you pay off the loan on one of the houses you currently own (first or second), the chances of getting a 90% mortgage on the third house increase!
- Commercial serviced apartments (Service Apartment) and home offices (SoHo) also have the opportunity to apply for up to 90% of the loan, but only if they are protected by the Housing Development Act (HDA).
- As long as friends who buy for commercial purposes, the maximum loan is 80%-85%.
Here I would advise everyone to be a responsible and good citizen, and pay your loan, credit card debt, credit card and personal expenses on time, etc. Then the bank will have no reason to reject your loan application! I hope the above sharing can help and relieve everyone’s worries and worries in the process of buying a house!
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