For your information, bank will look at the ‘3C’ before approving the loan application. The ‘3C’ represent the Character, Capital, and Capacity of the loan applicant. ‘’Character’’ refers to your credit pattern or loan repayment pattern. ‘’Capital’’ refers to the amount of savings and deposits the applicant has and lastly. ‘’Capacity’’ refers to DSR.
1. Debt Service Ratio (DSR)
Knowing the ratio of your debt to income is important and key in getting your loan approved. This is a formula used by banks to evaluate your affordability level. The DSR is calculated based on the total amount of monthly debt obligations – often called recurring debt/commitment which includes;
·
Total loan mortgage
·
Car loans
·
Personal loans
· Minimum monthly payments on any credit card debts
· Other loans, together with the monthly commitment for the current application
All of that will be divided by the net income – after deduction of Tax / KWSP / SOCSO (where applicable).
This has become the most common rejection reason, where approximately 35% to 40% of loans are rejected due to this.
Different banks have a different DSR cut-off or capping (60% - 70%, or some even up to 80%).
Make sure your DSR is between (30%-40%). If your monthly commitment is too high, the chance of being approved for a loan is very low.
2. No Commitment
For your information, it is difficult for the bank to approve a loan if you do not have any loan at all. Because the bank cannot trace your loan payment pattern whether you pay on time or not. The solution is that you can do ASB Financing or credit cards.
3. Poor
Credit Score / Poor Repayment
A good credit score means that you don’t have a lot of debt and you’ve been paying off your financial obligations on time.
The CCRIS report will be able to track whether you have made the minimum payment or the full payment, or if you have late or overdue payments. The CCRIS can even track your outstanding balance for the month, so even a small amount that left is unpaid for several months may not be favorable for you if you are planning to apply for a home loan.
4. No Stable Income
Bank will want to make sure that the loan applicant has a stable recurring income so they can be assured that you would be able to handle the monthly mortgage repayments. A certain occupation that may have low base salaries due to their jobs being driven by the commission may cause lenders to be a bit more cautious since the earnings are not fixed every month. It is best to produce several months of pay slips to show a somewhat consistent monthly income to raise the lender's confidence in you.
5. Not
submitting the right documents
It is vital to submit the right documents, especially income-related documents. For example, if you have two jobs or a consistent rental income, it is important to include these documents with your loan application.
You can even submit your salary crediting bank statements to show that there is income coming in that matches your salary pay slips.
Other documents can help support the loan application including a copy of the booking form by the property developer for the property you are hoping to purchase.
Simple things like ensuring the application form are filled correctly with the right address and contact number and ensure you include a clear copy of your identity card with your picture and relevant details also help.
6. Blacklisted Property Developers
Before you want to buy any house, make sure you research the developer's background. You can check the website of the Ministry of Housing and Local to identify the developers who have been blacklisted.
Among the reasons for these developers to be blacklisted are they do not have a license, fail to pay the compound, the developers default on the Tribunal Award Awards for Home Buyers Claim (TTPR), and are involved in abandoned projects, and others. So it is not surprising that the bank does not want to approve a loan if you want to buy a house whose developer has been blacklisted.
7. Record CTOS
Through this CTOS report, the bank can check bankruptcy status, legal action case status, ownership and business info. One of the reasons why banks did not approve your loan is that you do not pay the loan utility bills (telephone, electricity, water, bills). Not only that if you are subject to litigation including bankruptcy status, but it will also affect your chances of getting a loan.
8. Cheque
Maintaining discipline in your cheque facility is important. If you have 2 or more bounced cheques in the past 12 months, most banks will not proceed with your mortgage application.
The record will remain, regardless of whether the affected current account is closed or the account is not from the bank you are applying for the loan.
