This post is dedicated to my two friends who are getting married and planning to get their first matrimonial home this year.
So how does one begin to buy a property without prior experience or the skills needed to ensure a smooth property transaction?
We tend to over-estimate our capabilities and this ignorance would cost us dearly. A mistake in a property transaction can easily cost over tens of thousand of dollars.
As this post is dedicated to my two friends, I will be sharing this “guide” as a prewedding gift to them and, also to the rest of you new home buyers. This guide will help you to minimise any mishap in the property transaction.
P.S – Every property transaction is a unique case. Hence, this guide is just for general use and I will not be responsible if there is any setback in the transaction.
Step 1 : Apply for the Intent to Buy
If you are planning to get a resale HDB, the first and foremost step is to apply for an Intent to Buy. This is required by HDB as part of their “cooling” measure. Only after you apply the intent to buy, you can option for the property a.k.a. place a deposit for the property.
There are NO FEES involved for applying the intent to buy. You will receive an instant assessment on 1) your eligibility to buy a HDB resale flat, 2) the housing grants you are eligible for, and 3) your eligibility for a HDB housing loan. The ‘intent to buy’ letter is valid for up to 1 year.
You might ask, why should I apply the intent to buy when I’m only shopping around. First, there is a 7 days cooling period after the intent to buy is applied. Meaning that if you have decided to deposit for a property before you apply the Intent to buy, you will have to wait 7 days before the contract is valid. Imagine if you have found a place that you and your spouse both love after 30 ++ property viewings, only to find out that you need to wait 7 days before you can put a deposit. After all that trouble and viewing, another couple may snap up the same property.
Step 2 : Apply for a letter of offer or housing loan eligibility
This step is equally crucial. You may think that you can afford a place, only to find out that you can’t. There may be some underlying debt that you may have forgotten about.
By not checking your eligibility, you may lose your deposit, which can be up to $5000.
You can decide on whether you want to use a HDB loan or bank loan. Usually, I would recommend a HDB loan a.k.a. HLE for first timers. This is because there is minimal cash needed for the purchase. For bank loan, a minimum of 5% cash is needed. You can apply the HLE through the intent to buy.
If you are not eligible for a HDB loan, or planning to get a bank loan, get a letter of offer from the bank. For this, you can approach me at 94508732 and I will be happy to assist you. There will not be any charges. 🙂
Both financial institutions and HDB will need the latest 3 months pay slips to estimate your loan eligibility.
Step 2 is crucial when you have decided to make your first move (putting the deposit) on the property purchase.
Step 3 : Calculate how much you can afford
The factors you’ll need to consider into your budget are:
- Your cash savings
- CPF savings
- CPF housing grants
- Your loan eligibility
If you are planning to use a HDB loan, make sure you have at least 10% CPF in your ORDINARY account for the down-payment of the flat. If you are planning to use a bank loan, you will need at least 5% down-payment in CASH and 20% in CPF.
If this is your first time buying a HDB flat, I will recommend taking a HDB loan first unless your combined family income is more than $14,000 or $21,000 for extended families.
You will also need to set aside some cash and CPF savings for HDB’s fees, which cover admin, valuation, legal and stamp duties. Of course, you will also need to account for any renovation you want to do in your new home.
Bear in mind you will need a valid HDB Loan Eligibility letter from HDB, or a Letter of Offer from a private financial institution in order to proceed with any purchases.
Step 4 : Search for your dream home
Now that you know how much you have for your flat, you can start searching for units that fit your personal needs and budget.
It’s also good to find out about the development plans for the district and surrounding areas. Don’t be afraid to ask as many questions as you need. A property is a big financial commitment, and you’ll want to get it right the first time around.
Check the sales history of similar flats nearby to determine whether the price is reasonable. You do not want to end up paying Cash Over Valuation.
Finally, check the ethnic quotas of the flat you are planning to buy – you may not be eligible to buy it if the quota is not met.
Step 5 : Negotiate on prices and the OTP
Once you’re ready and satisfied with the unit, you can make an offer to the owner. If accepted, the owner will give you an OTP (Option to Purchase). This becomes a contract between you and the seller, and is valid for the next 21 days.
This means the owner of the flat is bound by law to not sell the unit to anyone else. The fee for an OTP is usually between $1 to $1,000, and will be borne by the buyer.
If you do not proceed with the sale, the owner will be free to offer the flat to another buyer after the OTP expires. Any fees you paid for the OTP are non-refundable.
Step 6 : Get a valuation report
Once you’ve gotten the OTP granted to you, apply for a valuation report. This report determines the value of the unit. HDB or the banks need it to process your loan.
Step 7 : Exercise the OTP
To exercise the OTP, you’ll need to:
- Sign on it
- Pay the deposit the seller
The deposit should not exceed $5,000, including the OTP fee which you’ve paid.
After you have exercised the OTP, you and the seller need to submit your resale application to HDB.
You will always need to agree on a date and time with the seller to attend HDB appointments together. You’ll need to indicate this agreed timing on your respective applications.
Step 8 : Attend the HDB appointment
There will be one appointment that you both NEED to attend – Resale Completion Appointment.
Before the Resale Completion Appointment, you should visit the flat one last time with the seller to ensure any defects are found and rectified by the seller before the handover. This last check is usually after the seller has moved out of the unit, but before the completion of the sale.
After all of this, if everything goes smoothly, you will then receive the keys to the flat. And there you have it, the steps to buy a resale flat all on your own.
If you have any queries, I just a phone call away 🙂 +65 94508732.