Here are some of the different steps involved in the property buying process.
1. Checking your eligibility
Firstly, you have to check if you are eligible to purchase a private property if you currently own a HDB/DBSS or EC. You will need to fulfil the Minimum Occupation Period before you can even book a unit. If you do not own any HDB/DBSS or EC, these rules will not apply to you.
Here, if you are a permanent resident or foreigners. You are not eligible to purchase a landed property in Singapore. As landed property is limited in numbers and are exclusively reserved for citizens.
However, you are eligible to purchase most type of private property in Singapore be it residential, commercial or industrial spaces.
2. Determine Your Budget
Next, you must decide how much you can afford to spend on your property. This will be assessed through your monthly income after deducting your monthly expenses.
For most property purchases, there is a 25% down payment. The first 5% has to be in cash followed by the remaining 20% which can be either cash or CPF. The remaining 75% will be in loan. Your loan amount will be subjected to a Total to Debt Servicing Ratio (TDSR) regulated by MAS.
If you are a foreigner taking a loan from a local bank. Your Loan to Value (LTV) will be significant lower from 60% to 70%. Please check with a mortgage broker for an assessment.
In addition, if you have an existing mortgage loan, your Loan to Value (LTV) will be significantly reduced.
a) For individual borrowers who have no outstanding housing loans, the LTV limit will be 75%, or 55% if the loan tenure exceeds 30 years.
b) For individuals obtaining a second housing loan, the Loan-to-Value (LTV) limits will be 45%, or 25% if the loan tenure exceeds 30 years.
c ) For individuals obtaining third or subsequent housing loans, the LTV limits will be 35% or 15% if the loan tenure exceeds 30 years.
Keep in mind that there are also additional costs associated with buying a home such as stamp duty, legal fees, etc.
It will be advisable to speak to a mortgage broker or a property agent to understand your finances better.
3. Get An In-Principle Approval
Before you even start viewing houses, it will be advisable to secure a bank’s in-principal approval on your loan. Here, you may need to submit your monthly pay slips, CPF contribution (if applicable) and other documents to a mortgage broker. They will work out the sum that you can borrow. This in-principal approval will give you an idea how much you can borrow and what is the maximum purchase price for your property.
4. Research The Market
Once you have determined your budget and chosen your ideal property, it is important to research the market in which your property is located. You will need to consider amenities such as public transport, proximity to places of work, schools, markets and shopping centres. Some will consider the tenure, size of the development and facilities. External factors such as noise and smell affecting the property may also be your consideration.
If you are not well versed in that particular area, you may like to consult a local property agent that is familiar with that locality.
If you have difficulties in finding the right property or missing out to other buyers, you may consider using a buyer’s agent who can do all the house hunting based on your budget and who can explain the process and negotiate on your behalf. A good buyer agent can provide you with insightful information on the neighbourhoods that are not easily accessible to the general public.
House hunting is always fun but also equally stressful. That is why it is important to have a clear approach, or else you will be wasting a lot of time. If you have an ideal location in mind, it will be good to view some of the houses in that locality first. Subsequently, shortlist a few projects that are suitable to your budget and preferences. And be prepared to make an offer for your preferred property.
If you do not have an ideal location in mind, it will be good to select a few units in the various location to view first. It is important to shortlist a few projects that fit your criteria and slowly zoom in to that location. A rule of thumb is to view appropriate 20 to 30 houses before committing a unit. However, a word of caution – viewing too many houses may lead to viewing fatigue and frustration in the entire house hunting process.
6. Making An Offer / Booking A Unit
If you are buying a HDB flat, you will need to negotiate through your property agent. Once the offer has been accepted. The seller with issue you an Option to Purchase (OTP) in return for your option money. The option money is cap at $1,000 (maximum) of the purchase price.
Once your offer has been accepted, an option period of 21 calendar days will apply. This option period is for you to secure a loan from the banks as well to do a valuation. During this period, the seller cannot sell the property to another buyer. However, if you fail to exercise the option by the 21st day, the seller has the right to forfeit the $1,000 deposit and re-market the property again.
If you decide to purchase the property, you are required to sign on the option and prepare a $4,000 (maximum) exercise fee to the sellers. The respective agents will proceed to submit to HDB for the resale application. Once HDB acknowledge all document. The completion of the property transaction will be fixed at 8 weeks. Both parties will be required to attend HDB completion at HDB hub.
If you are buying a resale private property, you will need to negotiate with the seller through the seller’s property agent. Once the offer has been accepted. The seller with issue you an Option to Purchase (OTP) in return for your option money. The option money is usually 1 % of the purchase price.
Once your offer has been accepted, an option period of 14 calendar days will apply. This option period is for you to secure a loan from the banks. During this period, the seller cannot sell the property to another buyer. However, if you fail to exercise the option by the 14th day, the seller has the right to forfeit the 1% deposit and re-market the property again.
If you decide to purchase the property, you are required to sign on the option and prepare a 4% exercise fee to the seller’s solicitor. The completion of the property transaction will usually take 12 weeks after you have exercised the option. Your solicitor will contact you on the procedures.
If you are buying a new home, you will need to pay a 5% booking fees to the developer. Most new homes have fixed prices although some developers may give a small discount. The space for negotiation is pretty limited. The developer will issue you the Option to Purchase (OTP) in return for your booking fees. In the meantime, you will need to finalise your mortgage and obtain the banks letter of offer. The developer will subsequently send you the Sales and Purchase agreement (S&P) to your mailing address or through your solicitor in the next 2 weeks. You will be granted 3 weeks to sign on the S&P and make payment of the remaining 15% fees within 9 weeks from the booking date.
In any event if you decide not to proceed with the purchase after paying the 5% booking fees, the developer will have the right to forfeit 25% of the booking fees. (1.25% of the purchase price)
You will need to service the mortgage repayment accordingly to the different stage of the construction progress. Once the development receives its Temporary Occupation Permit (TOP), your solicitor will advise the instruction to collect the keys for your new home.