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Buying a home in 2022? Here’s an 8-step preparation list , Lifestyle News

Buying a home in 2022? Here's an 8-step preparation list , Lifestyle News
Written by Publishing Team

In light of the new cooling measures, and the ever-changing real estate market, we have compiled a new preparation menu.

Whether you’ve already shortlisted real estate, or just started your search, the following will help create a seamless transaction. Above all, look for timing issues, option dates, and pre-approved loans to reduce the risk of costly errors:

1. Start paying off your existing loans

It is ideal that you start paying off your debts 12 months before you apply for a home loan. Even if you’re a little late, it makes sense to get started quickly (at least you can show bank proof that you’re paying off previous loans).

Cooling measures in December 2021 reduced the total debt service ratio (TDSR) to 55 percent.

This means that paying off your home loan, as well as all other debts such as credit cards and education loans, can cost no more than 55 percent of your stated income. Note that this is slightly narrower than the previous limit of 60 percent.

The lower the debt burden, the easier it is to qualify for most housing loans.

2. Find the cheapest bank, and get the pre-approval

Use a mortgage broker to find the cheapest mortgage lender (it rarely costs anything, as most mortgage brokers work on commissions from the bank).

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At any given time, there are usually only two or three banks that have the lowest rates. These are the banks you will want to contact to obtain an Initial Approval (AIP).

It is the amount the bank will loan to you if you buy a property. For HDB properties, the equivalent would be to have your own HLE character. You need pre-approval for two reasons:

First, it ensures that you have the financing for the loan, and can safely pay a purchase option deposit (OTP) or reservation fee (these deposits are non-refundable).

Secondly, it shows how much you can borrow if you use the cheapest bank; This helps determine your maximum budget.

3. Shortlist the features you are interested in and display them

Once you have the real estate listing, the real estate broker (or the seller’s realtor if you’re not using one) can arrange the views. Remember that:

  • Make sure you meet the eligibility requirements before choosing the abbreviated modules. If you and your spouse are permanent residents, for example, you will need to have lived here for at least three years before you can buy an apartment.
  • View each property more than once; Try watching it at different times of the day
  • Note the available payment schemes, such as whether it is a gradual payment (for new launches).
  • Check the numbers using URA transaction records, not by comparing listing prices on portals.
  • Check for defects or problems with resale units, and obtain written consent from the seller to repair them, as a condition of sale (unless you are willing to receive them “as is”, possibly for a discount)

Stacked provides step-by-step advice for home buyers, and can walk you through this important setup step.

4. Check out the URA master plan

Here is a guide on how to use the URA Master Plan. Make a note of future developments on nearby plots, which may hinder your view, or create competition.

You really don’t want to be in a situation where you are surprised by a new development blocking the view you paid or have to deal with construction noise or traffic diversions, all because you didn’t do your homework.

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Owners and investors should also check general plans for the neighborhood. Ideally, you want your home to be close to one of the major future amenities, such as a nearby new mall, or a futuristic subway station.

A URA master plan is also a good separation tool when you only have two or three options for a property.

5. Make sure you can cover down payment and stamp duty

The total available should be enough to cover the down payment on your property, plus buyers’ stamp duty (BSD) and additional buyers’ stamp duty (ABSD) if applicable.

Under cooling measures in December 2021, you should be able to pay at least 15 percent of the fixed rate, before the loan covers the rest. This can be in any combination of cash or CPF.

For example, if your apartment is priced at $500,000, you should have any combination of $75,000 in cash or CPF for the down payment.

For banks, you must pay the first five percent of the property in cash. The next 20 percent can come from any combination of cash or CPF.

So, for the same $500,000 apartment, you’ll need $25,000 in cash and $100,000 in any combination of cash or CPF.

Stamp fees such as BSD and ABSD must be paid within two weeks of purchasing your property. You can check stamp duty rates in the Stacked Directory.

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For resale property, keep in mind that the loan percentage applies to the appraisal, not the seller’s price. So if the property costs $500,000, but is worth $470,000, the additional $300,000 should be covered in cash.

As a general principle, it is recommended to have sufficient funds available to pay 30 percent of the property before proceeding with the purchase.

6. Discuss the retention method with any participating borrowers

You can own the property under a joint lease (all participating borrowers are considered as one legal entity), or under a joint lease (each participating borrower owns a certain percentage of the property).

We have a more detailed explanation of this in a previous article.

At the same time, there must be a common agreement on how the property will be used; Such as whether there will be tenants, how to determine when to sell, etc.

You should speak to an attorney responsible for the implications, before making your choice.

7. Plan your step schedule

If you are upgrading, it is recommended to contact a realtor for assistance. The question of selling your apartment before buying an apartment (or vice versa) is a complex one.

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For example, you will have to pay for ABSD if you bought an apartment before selling your apartment; And you will only have six months to sell your apartment and claim ABSD forgiveness.

This has become more sensitive with cooling measures in December 2021; Even Singaporeans will now pay 17 percent ABSD on the second property.

Also keep in mind that in some cases, you may end up servicing two separate home loans simultaneously; This can happen if you bought before paying off the mortgage on your previous apartment.

At the same time, settle for temporary accommodation and storage. A developer may have to move twice (for example, once to a rental property, and then again later when building his new apartment).

Ideally, you really want to be able to move the house without having to pay money to rent it (it also doesn’t help that the minimum lease term is three months). So from getting the proceeds from the sale of your apartment, to being able to move in on the right date – it’s essential to plan properly to get it right.

8. Plan for renewal and delay costs

When agreeing on the final price for your home, remember that you still have renovation costs after that. This typically ranges between $30,000 and $50,000 for most three-bed units, if you’re conservative.

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Besides the price, the lack of labor and manpower is slowing down the contractors. This could mean delays in renewal, which could lead to the need for temporary housing.

Also note that most renewal loans are capped at six months of your income, or $30,000, whichever is higher. Interest rates can range from three to four percent per year.

You may have to save more than just the down payment if you also want renewals without using a loan.

This article was first published in stacked houses.

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