A couple should buy a 3 room HDB flat if combined gross income is less than $4000. This means, if a couple, both are diploma holders and just started working, they most likely will not be able to afford a 4 room flat. let's find out why.
Are you planning to apply for a BTO flat? Do you know the flat size which you are eligible for? Many couples apply for a HDB flat 2-3 years before they get married. Sometimes your other half has not even started working yet. This is to ensure that they have their own flat by the time they get married in 2-3 years time.
But did you know that you can successfully apply for a BTO flat but not qualify for a HDB loan later when the flat is completed? When that happens, you will have to top up the difference by cash/CPF or forfeit your flat and lose the 5% down payment and other fees.
Here's how the loan process works for BTO flats:
- When you first apply for a BTO flat, you'll be required to submit a HDB Loan Eligibility (HLE) Letter.
- Once your application for HLE has been approved, you can proceed to sign the agreement of lease for a new flat. The signing of agreement will go on even if your max loan does not cover 90% of the purchase price(case by case basis).
- This HLE letter is valid for 6 months only
- Most BTO flats take 2-3 years before they are completed so your 1st HLE is no longer valid.
- You'll be required to apply for a 2nd HLE. This is the important stage. If your HLE application does not cover 90% of HDB purchase price at this stage, you are required to top up by CPF/cash
- If you are unable to top up, you will have to either take a bank loan or forfeit your flat and lose the 5% down payment you paid plus other initial cost
Here are some post from other people in forums:
So, do not overestimate your potential combined income. BTO takes 2-3 years to build and your income might be different by then. Furthermore, now there's a 30% mortgage servicing ratio(MSR) for loans. which means you can only use 30% of your combined gross monthly income for paying of monthly housing loans.
Let's take a look at the newest BTO launch at Punggol in Jan 2014 and see the prices and the incomes which you should have to qualify for a loan:
Punggol Bayview BTO flats(Launched in Jan 14)
Price of 3 room flat: $184,000 - $232,000
Price of 4 room flat: $293,000 - $366,000
Price of 5 room flat: $393,000 - $470,000
Combined gross income you should have to qualify for a 90% loan of purchase price:
Combined gross income for 3 room flat: ~$2506-$3160
Combined gross income for 4 room flat: ~$3990-$4983
Combined gross income for 5 room flat: ~$5350-$6400
*Prices are adapted from HDB website. For more information on the above prices, click here
This brings me to the point that if you and your spouse combined gross income is less than $4000, you should get a 3 room flat. You should not get a 4 room flat selling at $300,000 as you may not qualify for the 2nd HLE. When that happens, you may have a big problem. Of course if you have extra CPF or cash to top up the difference, then it'll be alright.
Know what you can afford!
Share it with your friends and loved ones to let them know.
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*Disclaimer- The above information only serves as a guide and does not indicated if your actual loan application will be approved. Whether or not your HLE will be approved depends on HDB themselves. For more information on HLE, click here.
SG Young Investment
*The author blogs at sgyounginvestment.blogspot.com
