Each day, some people some where at different stage of life will decide they are ready to purchase a car, a home or in need of personal loan for various reasons.
However, your own gut and feelings don’t determine whether your loan approval will be successful or not. Your DSR or Debt Service Ratio will.
While bank loan officers will always assist you on calculating your DSR, it is always best practise to take matters into your own hands and find out for yourself to ensure smoother loan approval process as it can be highly tedious and time consuming.
So What is Debt Service Ratio?
Debt Service Ratio, or DSR, is a calculation used by the bank to check whether you can repay the loan.
Your DSR is usually compared against the bank’s maximum allowable DSR limit. If your DSR is within the limit, you stand a higher chance to receive the loan.
Normally, the lower the DSR, the better the chance that you can get a loan approved. Best advice is you should always maintain the DSR within 30-40% range.
Do take note that a DSR limit varies according to individuals and their respective levels of net income.
How tedious is Housing Loan Application?
First of all, you would need to prepare a list of documents to provide to the bank loan officer before the financial institution can process your loan application:
- A photocopy of identity card or passport
- Your latest 3 months’ salary slip.
- Your latest income tax return form (form J) or EA form
- Sale and Purchase Agreement/deposit or booking receipt/letter of offer from the housing developer.
- A photocopy of the land title (if any)
- The latest bank statements (compulsory in the absence of salary slips and/or Form J/EA Form) dating back six months/savings passbook/fixed deposits
- Valuation report for completed houses and/or
- If you are self-employed, you need to provide your business registration documents, latest 3 months bank statements, latest financial statements and other supporting documents to support your income
That’s not all, it is also important to note that some financial institutions may require additional supporting documents before they approve your housing loan application.
Upon acceptance of the letter of offer, you will need to appoint a lawyer to draw up the loan documentation for you. Normally, you would select your lawyer from a list of panel lawyers provided by your financial institution.
Some of these documents need to be submitted to the relevant government authorities for registration and to the Stamp Office for stamping.
Upon completion of the above, these registered documents are then submitted to the financial institution and you will be given a copy of the Loan Agreement.
In general, the timeframe for the completion of this legal process should not exceed 6 months.
How is Debt Service Ratio calculated?
Your DSR or Debt Service Ratio is calculated based on info derived from the documents provided. The formula goes as below:
Total Monthly Commitments / Total Monthly Income X 100% = Debt Service Ratio
Most people will simply lose focus and leave it to the financial institutions to handle it. However, there are better and easier ways to find out your eligibility and potential successful rate for your housing loan approval.
Visit Hi HOME official website today and find out not just your eligibility and how much Housing Loan you can get with your current financial status, but ALSO the right property just for you in just 60 SECONDS!
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