How To Qualify And Apply For A HDB Loan?

If you’re looking to buy a HDB flat, and your monthly salary does not exactly make you a millionaire, you will most likely have to get a home loan.

Other than taking a loan from a bank, you can apply for the HDB Concessionary Loan (or HDB loan, in short), which is a special type of mortgage issued by the government body.

(Not sure whether a bank loan or HDB loan fits you best? Read this previous post.) This article will tell you what you need to know about taking a HDB Concessionary Loan.

Eligibility for HDB Loan

The key thing to note is that the HDB loan has an income ceiling of $14,000 for couples ($21,000 for extended families). If the annual assessable income for both applicants (e.g. you and your partner) exceeds this amount, you’ll have to take a bank loan instead. After all, the intention of HDB in financing mortgages is to make home loans with stable terms available for those who might not be able to get a bank loan on favourable terms, if at all (i.e. flat buyers of lower income).

That said, while the HDB loan is seen as a godsend for some, HDB as a lender is also obliged to exercise fiscal prudence. In short, this means a lower income will get you a lower maximum loan amount, affecting which HDB flat you can afford. An odd-job or part-time income stream might also have to undergo what’s called a 'haircut', where only 70% of that income is considered for the loan application.

These are the eligibility criteria you’ll have to meet if you are looking for an HDB concessionary loan:

• You are a Singapore Citizen
• You are 21 years or older
• Your gross monthly household income is less than $14,000 ($21,000 for extended families)
• You do not own, or have not owned any residential private property in the 30 months before the application for the HDB loan
• You do not own more than one market/hawker stall or commercial/industrial property
• If you do operate a market/hawker stall or commercial/industrial property, you have to work in it yourself

A more detailed version of the list above can be found here.

Next step: Apply for a HDB Loan Eligibility Letter (HLE)

The next question facing you is probably: so… how much loan can I get? You can find out by applying for a HLE letter, which specifies the maximum loan amount from HDB you can stand to receive. The HLE letter should be obtained before your first appointment (for BTO buyers) or before you sign the Option to Purchase and pay the option fee as deposit (for resale flat buyers).

The maximum amount that HDB will be granting you depends on three main factors:

• Your age
• Your income
• Your financial standing

It’s logical to see how your age and income both influence your maximum loan amount. Given the unit to buy and the borrower’s financial standing (e.g. outstanding debt) is the same, HDB would extend a higher loan amount to the younger applicant simply because he has more years to pay off the loan before his/her retirement age, which is the cut-off age for any HDB loan.

As for your financial standing, this is a little bit more complicated. To begin, here are the things that do not influence your financial standing, and do not affect the amount of money HDB would be willing to lend you:

• Rental income
• Interest from fixed deposit/ savings account
• Alimony allowance (divorce cases)
• Bonuses
• Dividend income
• Director fees
• Overtime income
• National Service allowance
• Claims/ reimbursement/ expenses
• Overseas allowance for scholarships

Here’s how HDB takes income into consideration before specifying a maximum loan amount on your HLE letter. For a regular employee, the two most important documents that you are required to show HDB is a payslip — latest 3 months — from your employer and last 15 months’ worth of CPF contributions.

For self-employed, part-time and odd job workers, documents such as your annual tax assessment form (IR8A) needs to be furnished to HDB. They might also have to make a Statutory Declaration to state what they’ve declared is honest and true.

Required documents for the HLE letter

HDB requires different documents for different people. In a nutshell, the less stable your income, the more proof HDB wants before they would grant you a loan.

For an employee with CPF contributions

• Latest three months’ payslips
• 15 month CPF history

For an employee without CPF contributions

• Latest 12 months’ payslips
• Latest 12 months’ bank statements
• Credit Bureau report

For a self-employed person

• A valid Accounting and Corporate Regulatory Authority (ACRA) Business Profile computer or a valid licence of business/trade
• Latest notice of assessment from the IRAS or a Certified Annual Statement of Accounts from an audit firm

For commission-based and part-time workers

• Commission statements and payslips for the last 12 months
• Latest 15 months’ CPF history
• Credit Bureau report
• Latest 12 months’ bank statements

For odd job workers

• Latest Notice of Assessment from the IRAS or a recent letter from the employer certifying your job designation, commencement date, and your commission/salaries for the last 12 months
• Latest 15 months’ CPF history
• Credit Bureau report
• Latest 12 months’ bank statements

For a pensioner

• Latest 3 months’ payslips, or a recent letter from the previous employer stating the monthly pension received for the last 3 months
• Credit Bureau report
• Latest 12 months’ bank statements

For an unemployed person

• If you've been unemployed for less than 3 months then you should show income proof for the preceding months from the previous employer the gross monthly income and the last day of service plus you have to show the last 15 months worth of CPF history
• If you have been unemployed for longer than 3 months you have to submit a Statutory Declaration, which you can request at the HDB Hub loan counter or any HDB branch

An HLE letter takes about 3 weeks to obtain. In the event that you do not get the amount you were hoping for, you can basically reverse engineer the process.

To do so, start by looking at what factored into HDB’s decision and improve on these factors. If you are a commission-based worker, for instance, there is ample scope for increasing your loan quantum (e.g. if your commission income decreased sometime in the last 12 months you can try to take on more work, get a higher average monthly pay for 12 consecutive months and apply again. Or you might have outstanding debt that would raise your maximum loan amount if you repay them fully before reapplying.

To give you a useful idea of the maximum loan amount you’d get before you start your home search, HDB has a useful calculator to estimate how much loan your HLE letter will grant you.

Note: If you are buying a Build-To-Order (BTO) flat from HDB, then your financial position will be reviewed twice; once before you decide to purchase the flat, and another time nearer to the completion date of the flat. Make sure your financial ability to service the housing loan has not changed by this point. While quite rare, it is possible that after you have gone through the BTO process, and put down your down payment, you are unable to get an HDB loan. To avoid this disappointment so close to the finish line, we advise you to remain fiscally prudent and prioritise financial stability.

Credit Bureau Report

As noted above, getting a HDB Concessionary Loan also requires a credit report from certain buyers. While most people are not aware of this, the Credit Bureau Singapore (CBS) pools all your credit information from different banks and companies, giving you a personalised score! You can request your credit score here on www.creditbureau.com.sg. If you do not have an AA score (the highest), you have room to improve it and by that positively influence the maximum loan amount you may get.

Process of applying for a HDB Loan

There are two main steps to this process.

Firstly, you need to obtain an HDB Home Loan Eligibility letter (HLE letter). Apply for it on the HDB website.

Secondly, when you have the HLE letter, upload all the necessary documents unto the HDB portal.

That’s it. You can then track your application on the MyHDB portal. Typically, HDB replies within 14 days.

If your application is accepted, HDB will be in touch to finalise loan matters, such as whether you intend to service the mortgage payments in cash, or via you and/or your co-applicant’s CPF Ordinary Account(s) (CPF-OA). Note that the interest rate for an HDB Concessionary Loan is pegged at 0.1% above the CPF-OA account interest rate.

Thinking of a taking bank loan instead? Weigh the pros and cons.

If you found this article helpful, 99.co recommends How your HDB sale proceeds might get “taken” by CPF and Quick Guide to BTO and Resale HDB Grants for Singles

Read these next:
HDB Loan Vs Bank Loan: Which One Should You Go For?
SORA, Not SIBOR, Could Be The New Norm For Housing Loans In Singapore
How To Buy A House In Singapore: A Complete Guide
Step-By-Step Guide To Buying Your Very First HDB BTO In Singapore
HDB BTO, SBF Or Resale: Which Should You Pick?

By 99.co
Discover the best way to find houses, condominiums, apartments and HDBs for sale and rent in Singapore with 99.co, Singapore’s Fastest Growing Property Portal. 99.co is a property search engine with the overarching goal of building a more transparent and efficient property market. We are working towards that future by empowering people with the tools and information needed to find a place to live in the best way possible.