Rejected from a home loan recently? Whether as a first-time or second-time homebuyer, you may be feeling discouraged from the experience. Applying for a home loan has increasingly become more challenging with the recent Monetary Authority of Singapore (MAS) cooling measures taking place, with banks becoming stricter when it comes to lending.
But although certain groups including those with a high Total Debt Servicing Ratio (TDSR) and bad credit history will inevitably have a higher risk of rejection than others, there is still a chance of appeal. After all, you should still do all you can to maximise your chances at gaining approval of your home loan. Read on to find out what you should do when your home loan is rejected!
How can you overcome getting rejected from your home loan?
Scenario #1: Having a bad credit history
Do you have a bad credit history? Fret not! Not all is lost even with a less-than-ideal credit track record. Believe it or not, it is still possible to recover from the brink of bankruptcy. Unfortunately, you will not have the luxury of being the bank’s favourite repeat customer, so expect to wait many years before getting credit again. Depending on the bank, this could take anywhere from five to seven years.
Additionally, being late for credit card payments for at least two weeks is sufficient enough for the banks to place you on the naughty list, i.e your credit score also affects your borrowing ability. If all else fails, an alternative would be to obtain financing from alternative legal financial institutions like Singapura Finance or Hong Leong Bank Singapore, assuming waiting years to fix your credit is out of the picture. But you will need to keep in mind the following:
- You will be subjected to a higher interest rate on your home loan
- You need to clear any outstanding debt carried at present
Scenario #2: Having a high Total Debt Servicing Ratio (TDSR)
TDSR encourages prudent borrowing by limiting the amount that you can ask for. Your monthly repayment for all debts like credit card bills or car loans should generally not exceed 60% of your monthly salary. Otherwise, you will risk getting rejected from your home loan. On the other hand, securing an In-Principle Approval (IPA) with some banks first can help you easily avoid all this hassle before getting tied to a flat. To further improve your borrowing chances, you should also adjust the loan quantum and decrease your TDSR using the following:
- Lower the loan quantum
- Search for a more affordable flat and adjust the loan tenure or amount you want to borrow
Know that getting a home loan is never a sure thing, even with a sparkling credit history. Of course, there are evidently more ways you can overcome being rejected from a home loan- we have barely scratched the surface of what’s possible. Are you curious to find out more about your eligibility? Consult our friendly Mortgage Specialist for free! Call 6886 9009 now.