BUYERS of Housing Board flats will, from January, have to prove they can afford them before signing on the dotted line.
The changes, said HDB, are aimed at helping house-hunters better understand their financial situation before buying a flat.
They come about three years after the introduction of credit checks on low-income households wanting to buy HDB flats under special schemes.
Under the new rules, buyers intending to use HDB loans to buy their flats will need to have a letter from the Board indicating the maximum amount they can borrow, their repayment period, and monthly instalments payable, before they commit to the purchase.
Those using a bank loan to buy a flat will need a letter from the banks indicating a loan offer, while buyers paying with cash and/or their Central Provident Fund savings will need to show documents such as bank statements and CPF statements to prove they have enough money.
Currently, buyers of resale flats are told how much they can borrow from the Board only at their first appointment with HDB officers to process the sale - which occurs after they have committed to the purchase. Those buying new flats are informed of their loan quantums only after the keys to their flat are ready for collection.
Some buyers also start looking for bank loans only after exercising their option to purchase for the flat.
Property agents say the changes will also help reduce the number of transactions that stall or fall through because the buyers fail to secure loans from the banks or HDB.
Two of Singapore's biggest real estate agencies, Propnex and ERA Singapore, estimate that such hitches can happen in up to 20 per cent of resale transactions they see.
In the year to March, 10,100 new HDB flats were sold while another 31,300 resale flats changed hands.
Some buyers, said Propnex senior division director Eric Cheng, do not disclose financial problems, such as a previous bankruptcy, out of pride when they commit to a purchase. They later find their loan applications turned down by banks for the reason they did not want to disclose.
Then there are the more gullible buyers, who are pressured by sellers into committing to a purchase without knowing whether they can afford it or not.
Mr Cheng cited the case last month of a 54-year-old man earning about $1,300 a month who agreed to buy a two-room flat in Geylang without checking whether he could get a bank loan.
He was later turned down by four banks because of his credit history, and the small size of his requested loan, which was under $100,000. The flat's seller threatened to take legal action against him if the deal fell through.
'He was so stressed out. He was near to tears when he came to my office,' said Mr Cheng. Fortunately, HDB granted him a loan, allowing the sale to proceed.
The chairman of the government parliamentary committee on National Development and Environment, Mr Charles Chong, noted that some buyers fail to plan for sudden changes in their financial circumstances that can be sparked by retrenchment or illness.
Ideally, said ERA's assistant vice-president, Mr Eugene Lim, buyers should obtain a letter indicating their loan eligibility from HDB before shopping for a flat. They would then know what type of flats they could afford, and the agents they hire would have a clearer idea of what flats to show them.
'If they know their budget, it can save everybody's time,' he said.
tanhy@sph.com.sg
New rules for buyers - Using HDB loans to buy flats
Buyers need a letter from the Housing Board indicating the maximum amount they can borrow, their repayment period and monthly instalments payable.
Buyers need a letter from the banks indicating a loan offer
- Paying with cash and/or CPF savings
Buyers need to show documents like bank and CPF statements to prove they have enough money.
