Newbie guide to buying your first HDB home

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 transaction?

We tend to over-estimate our capabilities, and this ignorance would cost us dearly. For example, a mistake in a property transaction can easily cost tens of thousands of dollars.

As this post is dedicated to my two friends, I will be sharing this “guide” as a prewedding gift to them and the rest of your 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. Only after you use the intent to buy you can option for the property, a.k.a. place a deposit for the property.

You might ask, why should I apply the intent to buy when I’m only shopping around.

There are NO FEES involved in applying the intent to buy. Also, you will receive 1) your eligibility to buy a HDB resale flat, 2) the housing grants you are eligible for and 3) your eligibility for HDB housing loan. The ‘intent to buy’ letter is valid for one year.

So why wait? Just apply for the intent to buy. There are so many upsides and no downside. Apply here.

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, up to $5000.

You can decide whether you want to use HDB or bank loans. Usually, I would recommend 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 required. You can apply the HLE through the intent to buy.

If you are not eligible for 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. 🙂

Financial institutions and HDB will need the latest 6 months payslips 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 in your budget are:

• Your cash savings
• CPF savings
• CPF housing grants
• Your loan eligibility

If you are planning to use HDB loan, make sure you have at least 10% CPF in your ORDINARY account for the down-payment of the flat. On the other hand, if you plan 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 HDB flat, I will recommend taking 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, covering 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 that you will need a valid HDB Loan Eligibility letter from HDB or a Letter of Offer from a private financial institution 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 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 flat owner is bound by law not to sell the unit to anyone else. The deposit fee for an OTP is usually between $1 to $1,000.

If you do not proceed with the sale, the owner will be free to offer the flat to another buyer after the OTP expires. However, any fees you paid for the OTP are non-refundable.

Step 6: Get a valuation report.

Apply for a valuation report once you’ve gotten the OTP granted to you. 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:

1. Sign on it
2. Pay the deposit the seller

The deposit should not exceed $5,000, including the OTP fee you’ve paid.

After exercising 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. 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 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 87368736.