Personal Finance

How To Check Your HDB Loan Eligibility

January 20, 2023

If you’re looking for financing to purchase or take over ownership of a flat in Singapore, you may apply for a home loan from a financial institution or HDB.

Understanding the key terms and conditions for the different loan alternatives is crucial before deciding. HDB’s main aim is to provide affordable flats or houses to as many Singaporeans as possible.

In this guide, we’ll look at everything to do with the HDB loan eligibility (HLE) criteria, the HDB HLE application, and everything you need to know when taking an HDB loan.

Eligibility Conditions

The main difference between an HDB concessionary loan and a bank loan is the eligibility criteria one must meet.

For a bank loan, you’ll typically need a good credit score, but an HDB loan requires you to meet several other conditions to qualify for an HDB loan in Singapore before you qualify for HDB loan eligibility.

If you’re a first-time applicant for an HDB loan, you must meet the following conditions:

Citizenship

At least one Singapore citizen buyer

Household Status

Have not prior taken two or more home loans from HDB
Have taken a housing loan from HDB, and the last owned property isn’t a private residential property, including a HUDC flat, a property inherited as a beneficiary under a will, a property acquired/owned/disposed of through nominees, or a property acquired as a gift

Income Ceiling

For a single individual, the income ceiling is $7,000 for singles applying for a five-room or a smaller resale flat or a two-room new flat in a non-mature estate under the Single Singaporean Citizen Scheme (SCC)
For a family, the income ceiling is $14,000
For an extended family, the income ceiling is $21,000

Ownership

You must not have disposed of or owned any private residential property in the 30 months before the HDB HLE application for an HDB HLE letter
You can’t own a private residential property, which includes a property inherited as a beneficiary under a will or Intestate Succession Act; property acquired as a gift, a property disposed of/acquired/owned through nominees
You don’t own more than one hawker/market stall or industrial/commercial property. If you own one of these, you must operate your business from there and have no other income sources

Remaining Lease

The amount of the HDB loan depends on the remaining lease or tenancy, and the extent it can cover the youngest buyer to the age of 95.

If your income is not salaried – for instance, you do freelance work or odd jobs – your monthly income could undergo a ‘haircut’ where only 70% of it is considered for the HDB HLE application.

It’s important to note that HDB does not consider the following as part of your monthly household income:

Director’s fees
Reimbursement/claims/expenses
Alimony or maintenance fees
Bonuses
Income from ad-hoc overtime work
Interest or dividend income from deposit accounts
Pension
National Service allowance
Occupier’s income
Scholarship overseas allowance
Rental income

You can apply for the HDB HLE loan if you’ve met all the HDB loan eligibility requirements. If you’re still not sure or want to confirm, you can do the questionnaire from HDB to ascertain whether you’re eligible for an HDB loan in Singapore.

The amount you’ll be eligible to take out will depend on the following factors:

Loan-to-value (LTV) ratio: This is the maximum loan amount that can be issued for a specific property. It is expressed as a percentage of the market value of the property. It is up to 80% for HDB-given loans.
Mortgage Servicing Ratio (MSR): This is the portion of your monthly income that goes towards repaying the property loans. It’s capped at 30% of your monthly income and only applies to home loans for executive condominiums and HDB flats.
Total Debt Servicing Ratio (TDSR): This is the percentage of your monthly income that you use to repay your debts. It includes all debt obligations like car loans, credit card bills, student loans, and any property loans, including the one you’re applying for. The TDSR should be below or equal to 55%.

HLE Letter And Validity Period

The HDB Loan Eligibility (HLE) letter is a document that states the loan amount that HDB is willing to offer you. Aside from that, the letter also states the following:

Flat lease
Flat type
When the letter expires
Monthly expenses
Repayment period

The HDB loan and your CPF cash savings determine your available budget for the flat, including your CPF housing grants.

HDB uses several key factors to determine your loan amount and your ability to repay the HDB loan in Singapore. These are:

Your income
Your age
Your financial standing

If purchasing a Build-To-Order (BTO) flat, you’ll be required to have the HDB HLE letter before booking the new HDB flat or, in the instance of a resale flat, before signing your Option to Purchase (OTP).

It’s important to note that the HDB HLE letter is valid for only six months.

You’re not required to re-assess during this period if there are no serious changes in the financial position and income and no changes to the occupiers and applicants.

Credit Assessment Criteria

Knowing how HDB assesses their housing loans in Singapore will improve your chance of a successful application.

To qualify for an HDB home loan in Singapore, flat buyers must have a regular income and stable work. If you’re earning your income with monthly CPF contributions, you must:

Be in continuous employment for at least three months if your basic salary is fixed
Be in continuous employment for at least six months if your basic salary is not fixed

If you’re earning your income without monthly CPF contributions, you must:

Be in continuous trade or employment for at least six months
Have a good credit rating
Have consistent positive cashflow with bank statements for at least six months to service the housing loan

How, Where, And When To Apply For An HDB Housing Loan

If you’re planning to take an HDB home loan to purchase or take over ownership of a flat, you must apply for an HLE letter.

Here are the steps on how to apply for an HDB HLE letter:

Step 1: Prepare The Documents

When submitting their application, flat buyers must produce personal and other supporting documents as evidence of income. The documents depend on your Central Provident Fund (CPF) and type of employment.

For An Employee With CPF Contributions

As an occupier of the applicant, the documents include a recent letter from the employer showing the job designation, salaries for three months before the application, commencement date, and at least 15 months’ history on CPF contributions.

For Employees Without CPF Contributions

As an applicant, you need six or more months’ pay slips or a recent letter from the employer showing the job designation, six months’ salaries before the application month, commencement date, credit bureau report, and the latest six months’ passbook or bank statements.

As an occupier, you must provide three months’ pay slips or a recent letter from the employer showing the job designation, salaries for three months before the month of application, and commencement date.

For Self-Employed Individuals

You’ll need your Credit Bureau report, the latest six months’ passbook or bank statements, the Certified Annual Statement of Accounts from an audit firm, or the latest Notice of Assessment from IRAS.

For Part-Time And Commission-Based Workers

You’ll need a recent letter from the employer with the stated requirements, six months’ pay slips or commission statement, Credit Bureau report, the latest 15 month’s history on CPF contribution, and the latest six months’ passbook or statements.

For Odd-Job Workers

You’ll need the latest Notice of Assessment from IRAS and a recent letter from the employer with all proof, the Credit Bureau report, the latest 15-month history on CPF contributions, and the latest six months’ passbook or bank statements.

For Unemployed Individuals

Full-time students between 18-62 years should provide a valid Student Pass.

For the unemployed for less than three months, you should provide income evidence for the preceding month(s) from the prior employer showing your last day of service, gross monthly salary, and the latest 15 months’ CPF contribution history.

Step 2: Submitting The Application Online

The second step is to get the draft HLE application by visiting the MyHDB portal and submitting it with the required documents on the same website.

HDB usually replies within two weeks of your application outcome, and the HLE letter is only valid for six months from the date of issue.

Step 3: Authentication

You can authenticate the letter application using Singpass.

You Produce an HLE Letter When:

Taking an HDB loan
Booking a flat with HDB
Exercising the Option to Purchase (OTP)
Applying to take over the ownership of a flat by way of transfer and not resale

Factors That Determine How Much Housing Loan You Can Get

Your credit score
Your income
Your existing debt obligations
Your age
Your employment status
Your LTV ratio and property details

Can You Use Your CPF?

Yes. With a HDB loan, you can make a downpayment of at least 20% of the buying price, which you can then pay in full using your CPF Ordinary Account (OA) savings, with cash, or a combination of OA savings and cash.

You can use any balance remaining in your OA account for home loan repayments. If you continue working after 55 years, you can utilise the monthly contributions into the OA to service your mortgage even if you’ve not attained the applicable Retirement Sum.

Credit Thirty3 has you covered if you’re looking for financing to purchase or take over ownership of a flat.

Our experienced financial experts will guide you through the HDB loan application and ensure you get a loan tailored to your personal and financial needs.