Private Lenders For First Time Home Buyers

Private Lenders For First Time Home Buyers – Viewing showrooms and talking to real estate agents can make buying a home in Singapore easier. However, if you delve into the nitty-gritty, you will find that there are more complex aspects.

For example, managing finances, documentation and navigating different solutions can add layers of complexity to the process.

Private Lenders For First Time Home Buyers

There are several important considerations such as: Should you choose HDB or a bank loan? How much is the down payment? And what is LTV, MSR and TDSR?

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If you buy a flat in HDB, you have 2 loan options – HDB loan or bank loan. To help you decide, consider the following factors:

To qualify for an HDB loan, your monthly household income must not exceed $14,000 ($7,000 for singles and $21,000 for extended families).

In addition, you must not have owned private property in the last 30 months. If you do not meet these criteria, you should consider a bank loan.

If you choose an HDB loan, you can borrow up to 80% of the value of your house. On the other hand, with a bank loan, you can only get up to 75%.

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If you decide to take a loan from the bank, you must put down 25% of the sale price of the property, with at least 5% in cash.

With an HDB loan, the interest rate on your mortgage is a standard 2.6% p.a. (based on the prevailing CPF rate of 2.5% + 0.1%) which has not changed over the years.

Bank loans, on the other hand, offer a variety of loan packages, each with its own distinct interest rate. This type allows for more flexibility in choosing a loan that fits your needs.

In general, a fixed rate mortgage offers predictability and stability in monthly payments because the interest rate remains constant for a set period of time (usually 2-5 years). A fixed rate loan is beneficial in a rising interest rate environment because it protects against potential rate increases during the fixed term.

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Floating rate loans usually come with a lower initial interest rate than fixed rate loans. The interest rate is usually set at the Singapore Overnight Average Rate (SORA) or Fixed Deposit Rate (FDR).

If interest rates remain stable or decrease over time, you may pay less interest than you would on a fixed-rate loan. Keep in mind that the monthly payment may increase if the interest rate increases.

A two-in-one home loan allows you to have a portion of the loan amount under a fixed rate package for peace of mind and also avail interest in a floating rate package for the remaining amount. in debt.

In short, a bank loan may offer lower interest rates than an HDB loan. The main trade-off is that you need to keep an eye on your interest rate because it can change in 2 or 3 years. You may need to refinance your home loan (with the same bank) or refinance (choose a different bank for your loan).

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There is always the option to refinance from an HDB loan to a bank loan at any time to enjoy lower interest rates. Remember that refinancing adds appraisal and legal fees, so it’s wise to look at the package as a whole, not just the prices. The same goes for revaluation.

The LTV ratio refers to the loan amount as a percentage of the property value. Or first home loan, it is 75% of bank loan or 80% of HDB loan. Also consider your TDSR.

TDSR is the part of your income that goes towards all your debts, such as car and education loans. With a home loan, your TDSR cannot exceed 55% of your gross monthly income.

MSR can only be used if you buy an HDB flat or Executive Floor (EC). It limits your monthly contribution to 30% of your gross monthly income.

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Here’s an example of how TDSR and MSR affect your monthly mortgage payment amount (assuming you earn $5,500 in monthly income):

TDSR: Since the TDSR is 55%, you can spend up to $3,025 per month on loan payments (of all types).

MSR: Since the MSR is 30%, you can spend up to $1,650 per month on your HDB/EC home loan. ($1,650 per month is less than your total loan budget of $3,025.)

If you take out an HDB loan, most of your savings in the CPF Ordinary Account (OA) will be used for the down payment. You may consider setting aside $20,000 in your CPF-OA as the funds provide you with a safety net to pay your monthly installments in case of unforeseen circumstances such as temporary loss of income.

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If you want to leave your CPF savings and have money to spare, a bank loan allows you to pay the full payment in cash.

To understand the above loan limits, you can use the home loan calculator to calculate your monthly payment. Longer loan terms mean smaller, more manageable payments.

You also have the option to use your savings in your CPF Ordinary Account (OA) to pay your home loan installments.

Paying with CPF is certainly attractive if you need cash flow for your daily expenses and investments, but it also means giving up 2.5% risk-free interest on your CPF money.

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In the case of selling the property, you must return the CPF-OA funds used together with the accrued interest.

Paying off your loan with cash enables you to earn an interest rate of 2.5% on your CPF-OA savings. You can keep the sale proceeds without having to top up your CPF.

If you have the money, you may consider paying off your home loan in one installment to save on interest payments. It is important to note that some banks charge a partial payment fee, so weigh the pros and cons before proceeding.

If you choose a bank loan, consider getting an In-Principle Approval (IPA) to better understand your borrowing capacity to streamline the purchase process.

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This is a document from the bank that explains how much they are willing to lend you, taking into account your TDSR, MSR, income and credit score.

You must secure your IPA before paying the option fee for your home. This is important because if you find you can’t borrow enough on the property, you won’t get your option payment. In some cases, estate agents may ask for your IPA before proceeding with the transaction.

Having an IPA can also help speed up the loan repayment process. Most importantly, knowing your maximum loan amount prevents you from getting emotionally attached to homes that are out of your budget. You will be able to set realistic expectations and make informed decisions during your home search.

, so you can be sure how much you can borrow for your home, allowing you to know exactly your budget.

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When it comes to buying your first home, the thought of getting a mortgage can be more intimidating than shopping and negotiating. But we got you. Here’s an overview of some of the best mortgage lenders for first-time home buyers and a guide to what you need to know before you start the process. in the application.

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Better yet with the right mix of features and benefits, including no down payment, low mortgage rates and a fast 100% application process. Better Mortgage does not charge lender fees such as origination, application, processing and underwriting fees. As a result, Better says new home buyers will save $8,200 and customers refinancing will save $8,200 over the life of their loans. In addition, Better says applicants can receive a personalized rate quote in less than five seconds and pre-approval in minutes. This can help homeowners reduce costs while saving time. The lender also offers a $150 discount on closing costs when applying through the Ascent site.

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