CLOSING THE DEAL (PART 2): HOME LOAN

The clock has started ticking. The minute the purchaser gives the earnest deposit and both parties sign the Agreement To Purchase (ATP) or booking form; the clock starts ticking. Mr and Mrs Tan have 14 working days to secure a bank loan approval and to subsequently sign the Sales & Purchase Agreement (SPA).

Since Mr & Mrs Tan are first time home buyers, they are unsure which bank to apply for a loan. Furthermore, they may not have had a strong and long credit history with any of the banks yet. They only have 2 requirements:

1. Banks that can give the lowest interest rate and highest loan margin
2. Bankers that are experienced and hardworking

On the other hand, for investors and business owners, they may already have a preferred bank. Because they’ve a strong and long history with their preferred bank, they know the ins and outs to get the best financing for the property. They also understand the culture of the bank to their advantage.

Purchasers can go direct to the banks to apply for home loans. The banks’ mortgage consultants will service the purchasers. Alternatively, purchasers can apply for home loans through outsourced mortgage consultants (OMCs). OMCs act as intermediaries between the purchasers and the banks. They are a one-stop-solution for purchasers. They help the purchasers to apply for home loans with the banks.

Mr & Mrs Tan decided to apply directly with 2 – 3 banks for a home loan – Bank A, Bank B, and Bank C. Each bank will have their standard required documents from purchasers for the loan application. Some banks may require more supporting documents while some banks may require lesser supporting documents. The additional supporting documents are to further support the purchaser’s case to successfully get a housing loan approved. The standard documents that banks generally require are:

The bank’s mortgage consultant will then submit the purchaser’s loan application to the bank’s higher management for recommendation and approval. Usually within 2 – 3 working days, purchasers will know whether their loan application has been approved. When the loan application has been approved, purchasers will receive a Letter of Offer (LO) from the bank.

Mr & Mrs Tan loan application were approved at Bank A and Bank B. Mr & Mrs Tan did not meet Bank C’s requirements, therefore their loan application was rejected. Of the 2 remaining banks that approved their loan applications, Mr & Mrs Tan decided to accept Bank A’s offer. They managed to secure a 90% financing at an interest rate of 4.20% per annum.

The next step for Mr & Mrs Tan is to hire a solicitor to draft the Sales & Purchase Agreement (SPA).

Mr and Mrs Tan have 14 working days to secure a bank loan approval and to subsequently sign the Sales & Purchase Agreement (SPA).