Housing Loan Pitfalls That You Should Watch Out For
A Tip from a Real Estate Agent
Take a few minutes to peruse this article on housing loans pitfalls that you should watch out for and it may save you from financial ruin later.
Before you put down the deposit fee, to obtain the option for the purchase of a residential property, you might want to secure a pre-approved loan first.
This is to ensure that you have the financial resources to close the deal as part of or all of the deposit can be forfeited if the option to purchase is not exercised within the validity period, usually six weeks.
In addition, the valuation of the property may fall unexpected between the time the option to buy is obtained and a loan is found.
For example, the purchase price you agreed on is $1.5m, but when you have obtained the loan the valuation of the property has dropped to $1.2m (this can happen during a financial crisis).
Assuming that you are eligible for a 80% LTV, you thought you could obtain financing up to $1.2m, but because of the lower valuation you can only secure $960,000.
If you do not have the means to make up for the $240,000 difference, you cannot close the transaction; you may then lose all of or part of your deposit.
Do note that you are allowed to change financiers even after obtaining a pre-approved loan from a financier.
You do not want to be caught flat-footed, so try securing a pre-approved loan before laying down the deposit fee, you can still shop around for a better loan if property valuation has not fallen.
Lawyers or bankers recommended by property agents
You should exercise caution with regard to lawyers or bankers recommended by a real estate agent.
Sometimes the agents get a commission from such recommendation.
If this is the case then the lawyer, financier or real estate agent must declare a secret commission is being received by him for his referral.
As a result, the lawyer may charge you a higher than normal fee to make up for the referral fee paid to the agent.
Or the banker may not offer the best loan that fits your financial risk profile.
So be wish, be careful and shop around before you settle on the one you choses
Extra loans before disbursement of mortgage loan
Avoid taking any new loan before applying for a home loan.
Banks assess applicants' debt-to-service ratio (DSR) before granting a loan.
This is to make sure that borrowers have the financial means to service all their debts.
Going a step further, this also applies to the interim period after obtaining a pre-approved loan.
This is because the financier still has the right to pull back the loan or change the conditions of the loan any time before loan disbursement.
Therefore it is important to check with a home loans expert before taking on a new loan obligation.
On a last note, avoid job changes before applying for a mortgage loan.
Most financial institutions want applicants to be in the same job for a minimum period of time before loan approval.
This demonstrates to the financial institution that you have a stable job and income; hence the means to repay the loan.