One of the worst feelings is to have finally found your dream home, and then being forced to walk away because your financing is uncertain. Or perhaps you’ve put down the booking fee and signed the papers, only to realise there’s a timing issue – and now you need a place to stay for four months (when minimum rental leases are six months).
Come 2021, a lot of excited – but unprepared – home buyers are going to end up in these situations; it seems to happen every year. To prevent our readers from being in the same boat, here are some general preparations to take before your home buying journey starts:
Preparation checklist for home buying
- Be aware of eligibility requirements
- Prepare your paperwork for financing
- Check your CPF balance
- Work out the relevant timeline
- Shortlist the locations so you don’t get distracted later
- Prepare property cheat sheets
1. Be aware of eligibility requirements
A common mistake is to forget eligibility requirements. These are common complications with regard to HDB properties. For example, if you sold a private property recently, you won’t be able to apply for a BTO flat for 30 months; so you’d probably want to consider a resale flat instead.
Likewise, Permanent Residents must have stayed in Singapore for at least three years before they can buy a flat, and foreigners can only buy Executive Condominiums (ECs) that have been fully privatised (i.e. are more than 10 years old).
If you would exceed, or come close, to the HDB income ceiling, you may want to start making inquiries early. You might, for instance, write in to ask that your annual bonus not be included as part of your income (appeals are considered on a case-by-case basis).
If you suspect you’ll face eligibility issues – such as if you can’t marry your partner – contact us earlier so we can try to help you.
2. Prepare your paperwork for financing
This can be a time-consuming process, especially if you’re self-employed. So we suggest you get a head start in digging up the following:
- 12 months CPF contribution history
- Latest Notice of Assessment (NOA) from IRAS; for self-employed borrowers, you may need the past two years’ NOA
- Last three months’ payslips; for self-employed or contract workers, you may need to show the contract(s) with your client, or your invoices / receipts
- Commissions statements, if you work on commissions
- If you work overseas or have other income from abroad, you’ll usually need to provide statements showing how the income is credited
- If you have rental income from other properties, you may need to show the Tenancy Agreement(s)
We can help you with the paperwork you need, so do drop us a message.
The end goal is to secure in-principal approval for a home loan, so you know exactly how much you can borrow when it’s time to buy. Viewings aren’t very useful if you don’t know whether you can afford what you’re looking at.
This also ensures you won’t end up in situations where you put down a booking fee but then cannot get a loan, thus forfeiting part or all of the deposit.
3. Check your CPF balance
Your CPF can pay for 10 per cent of your property (with an HDB loan), or 20 per cent (with a private bank loan).
If you don’t have enough in your CPF however, you need to be ready to make up the difference in cash.
For example, say your property costs $1 million and you use a bank loan, with 25 per cent down payment. The first five per cent ($50,000) will be paid in cash, and the next 20 per cent ($200,000) can come from CPF.
If you only have $150,000 in your CPF Ordinary Account however, this means you need to set aside an added $50,000 in cash.
You can use your CPF for the down payment, the stamp duties (BSD and ABSD are payable with CPF), and the home loan repayments.
4. Work out the relevant timeline
If you’re upgrading from your current home, do you have somewhere else to stay between the sale of your home, and the completion of your new property?
Don’t forget to include time for any delays in construction or renovation, which are more common during the Covid-19 period. You’ll also need a place to store your larger items, while waiting to move into your new home.
A key difference in 2021 is that URA has restricted the re-issue of OTPs. This means it’s no longer possible for a developer to promise to keep renewing your lapsed OTP, thus giving you time to sell your current property first.
Alternatively, you may want to buy your new home first, and then sell and move out only once it’s ready. This is more convenient, but would require you to pay ABSD upfront, and apply for remission later (assuming you qualify). You may also have to be ready to service two home loans for a time.
We’d suggest you hold a family meeting about this, to check whose schedules would be disrupted. Based on your conclusions, you can better decide between, say, resale and under-development properties.
5. Shortlist the locations so you don’t get distracted later
Flashy marketing can be distracting, and often leads buyers toward properties they would never have considered at first. But while a great view and pool are nice, they don’t have the lasting appeal of being in the right location.
To minimise distraction, shortlist the following first:
- Locations within one kilometre of work or school
- Which transport nodes, such as MRT stations, are vital to you (which train lines do you favour? NEL? Circle line?)
- Whether you’re close enough to get the Proximity Housing Grant, if going for a resale flat
- Lifestyle factors; if you cycle a lot or are a cinema fanatic, you may want to shortlist locations that favour your hobbies
These should be the guiding principles that you walk into a viewing with; don’t let the advertising distract you.
You’ll probably be staying at the location for at least four years, to avoid the Sellers Stamp Duty (SSD) upon resale. That can be a long time to live 90 minutes away from work.
6. Prepare property cheat sheets
Before you go to a viewing, familiarise yourself with the transaction history of the property, if it’s a resale unit. If it’s a new property, check the prices of surrounding developments; this will give you a general gauge of prices in the area (although new launches are always priced higher).
Create a property “cheat sheet” with the following:
- Average quantum
- Average price psf
- Overall gains over the past five years (if available)
- Latest transactions in the past 12 months*
- A reminder to check maintenance fees
- Three to five key concerns to raise, such as road noise, the facing of the units, stacks closer to the MRT lines, etc. Don’t forget to ask about these when speaking to the seller.
If you can’t find the information, you can contact us for help, and we’ll see what we can dig up.
*These can usually be found by checking URA transaction records
Having the cheat sheet gives you a guide with which to negotiate price, and helps prevent spur-of-the-moment deposits.
A few hours of preparation can prevent mistakes that take years to undo
Purchasing a property is a major commitment, and is perhaps the most expensive thing you’ll ever buy. It is a little boring to prepare all of the above, but it does help to prevent serious mistakes – there’s no cheap way to undo your decision, once you put down a deposit.
Always take your time and think, even if you’re told the units are selling fast. (And you’re always told the units are selling fast).
For insights on pricing and specific developments, check out our full-length reviews on Stacked. We also provide you with fresh updates on the state of the Singapore private property market.
At Stacked, we like to look beyond the headlines and surface-level numbers, and focus on how things play out in the real world.
If you’d like to discuss how this applies to your own circumstances, you can reach out for a one-to-one consultation here.
And if you simply have a question or want to share a thought, feel free to write to us at stories@stackedhomes.com — we read every message.
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