6


Property Factors That May Result In Your Home Loan Being Rejected

Owning your first home


is a great achievement, especially recently, where the prices of property


exceed the income of the people. Most people start to think about buying their


first home when they get married, to accommodate their growing family.

Obtaining a home loan


can be easy if you know what to do, and how to prepare for it. However, if the


your property is in an undesired location, then getting your loans rejected or


being offered unattractive loan packages may be expected.

There are various


factors that can result in a home loan being rejected - from bad credit score


due to defaulted or late payments from other credit facilities, to low debt


service ratio (DSR). However, even if you have stellar income and credit


report, you may still be at risk of having your property financing rejected by


the banks, due to the following factors:

1. Types of land

If you find yourself


unable to get a loan for the property you want to buy, it may be due to the


land tenure. If the property you are buying is a freehold property, this


probably won't be a problem.

However, for leasehold (with less than 60 years left) and Malay reserved land, it may be difficult to secure financing from


certain banks. These lands are considered high risk for banks as they are


difficult to resell in an auction, due to its restrictions.

For example, if you


purchased a property on a 60-year leasehold agreement, it may be difficult to


refinance or resell it 15 years later, as the balance tenure is only 45 years.

As for Malay reserved


land, if the loan is in default by the owner, it will be difficult for the


banks to auction it, as only Malay buyers will be eligible to purchase.

2. Price of properties

Believe it or not,


most banks are skeptical about giving out loans for properties below RM100,000.


Even if you manage to find a low-cost property that costs less than RM100,000,


it will be difficult to secure financing for it.

Though the repayments


may be low for properties in this price range, the risk of defaulting is


generally higher. Hence, banks would rather not take the risk for the minimal


interest earned.

3. Developer of the


properties

If your housing loan


is rejected by the banks due to this reason, you can treat it as a blessing in


disguise.

Most banks will do a


Credit Tip-Off System (CTOS) check on the developer or seller to make sure the


company or individual is not under bankruptcy. If the result is not a


favourable one, you may not be able to complete the house purchase transaction.

This is to safeguard


the bank and also you, from dealing with an incomplete project due to the


developer's bankruptcy.

Most of the


developments by MBF raise the banks' red flags due to the company's


controversial financial turmoil when the company fell


in the late 90's.

4. Location

As everyone is adamant


in buying a Klang Valley property, it's time for a reality check. Not all


properties in the Klang Valley are good for investment.

You may find yourself


unable to get a loan for properties in certain areas due to various reasons.

Some locations may


have slow movement of appreciation or due to a history of landslide - namely


places like Bukit Antarabangsa.

Some other areas that


are not favoured by lenders are certain housing areas in Rawang, Puncak Alam,


Sungai Buloh, Puchong, Semenyih and Bandar Mahkota Cheras - to name a few. The


reasons for the lack of enthusiasm by the banks to approve loans for these


areas are the low marketability, occupancy, and increasing cases of auctions.

Some of the areas


frowned upon by bankers due to natural disasters like landslide and flood are


certain neighbourhoods in Batu Caves, Hulu Klang, Ampang, Wangsa Maju, TTDI


Jaya in Shah Alam and Bukit Gasing.

5. Maintenance and


upkeep

If you find an


affordable property in a hot location, don't celebrate yet. There could be a


lot of reasons why the property is at that price point.

Most banks are not


willing to approve home loan for old properties (more than 10 years) especially


if it is badly managed and maintained.

There have been a


number of properties in a good location that buyers find difficult to obtain a


loan for - namely, Palm Court Condomimium in Brickfields, a few properties in


Batu Caves, Perdana Residences in Selayang and De Tropicana Apartment in Kuchai


Lama.

There are many more


properties that fall under this category. One factor that new buyers must look


out for before deciding to buy a property is the surrounding area. Certain


properties that are located too near high-tension cables (Sri Sentosa


Apartment, Taman Sri Sentosa), or have bad parking access (Palm Spring


Condominium, Kota Damansara) may face difficulties in getting financing, too.

6. Title

Most property buyers


don't consider the status of the property title when deciding on a property.


However, this is important as it may be the reason why your home loan did not


go through.

A title deed is a


document showing the land registration number. The property title starts with


the master title under the developer and later on will be split into individual


(for landed properties) or strata titles (for non-landed properties such as


condominiums and apartments).

These titles will


grant the owner of each unit a title number and banks will usually expect


buyers of sub-sale properties to have these titles. If a property does not have


an individual or a strata title after 10 years, most banks may not want to


finance the property, leaving the buyers with limited options when it comes to


financing.

Deciding to buy a home


is not just about affordability as there are various factors when it comes to


getting a home loan approval. Unless you have a few hundred thousand ringgits


in cash, you may want to consider the above factors before making that jump to


buy a home.