How do I prepare my finances before applying for a home loan?

Preparing your finances before applying for a home loan can significantly improve your chances of approval, help you secure better terms, and ensure the purchase does not strain your long-term financial health.

Start by reviewing your credit score. Request your credit report from the Credit Bureau Singapore and check for any inaccuracies, unpaid bills, or delinquent accounts. A clean credit history with a good score strengthens your application. If there are issues, address them well in advance - it can take months for improvements to reflect in your credit report. Pay down outstanding credit card balances, as high revolving debt negatively impacts your TDSR calculation and credit score.

Build your cash reserves. Beyond the downpayment, you need funds for stamp duties, legal fees, agent commissions, and other upfront costs. Aim to have at least three to six months of expenses (including the expected mortgage payment) as an emergency buffer. Running out of cash immediately after purchasing your home is a common and avoidable mistake.

Reduce existing debt obligations. Since TDSR considers all monthly debt commitments, paying off car loans, personal loans, or credit card debt before applying increases your borrowing capacity. If you cannot pay them off, consider whether consolidation or faster repayment is feasible.

Ensure your CPF Ordinary Account has sufficient funds if you plan to use it for the downpayment, stamp duties, or monthly repayments. Review your CPF statements and calculate the available amount after setting aside the required retirement sums (if applicable for your age and property type).

Gather and organise your income documentation. Having your payslips, CPF statements, NOA, and bank statements ready before approaching banks speeds up the application process and demonstrates preparedness.

Set a realistic budget that accounts for all costs, not just the purchase price. Include stamp duties, renovation, furnishing, insurance, and the ongoing costs of homeownership such as maintenance fees and property tax.

Get an In Principle Approval (IPA) from one or more banks before house hunting. This confirms your borrowing capacity and gives you confidence when making offers.

Cashew's mortgage advisors can conduct a financial health check and advise on specific steps to strengthen your loan application before you begin the process.