While you are waiting for your dinner to be served or stuck in traffic with nothing to do, why not spend a few moments learning what happens after you click "submit" on your loan application?
Will you be purchasing a home? Or maybe you're thinking about getting a better rate by refinancing your current mortgage. Knowing what goes on behind the scenes after you submit your loan application could prevent any unneeded worry or unpleasant shocks. We'll go over the steps, discuss the most typical causes for rejection, and look at ways to improve your approval odds!
💰How long will the housing loan application process take?
Pretty sure one of the big questions on your mind is probably: “How long will this take?” Well, the paperwork might take some time to put together, but once that’s done, you can expect a response from the bank within 2 days to a week.
While you wait, the bank is already hard at work checking in with three important entities:the Central Credit Reference Information System (CCRIS), the Income Tax Department (LHDN), and the Employees Provident Fund (EPF). You may learn whether your financial profile is clear or if there are warning signs with these confirmations. Your loan's destiny is being decided, so please be patient.
If the Bank needs more clarification, then they may request more documentation that will prolong the duration.
🔍 Prioritize Your Debts Wisely
Once you've submitted your home loan application, one of two things will happen: either you'll hear back from the Bank (and rejoice!) or they'll tell you.... no.
The major question that may come to mind after your loan approval is: "Am I able to pay it off early?"
Really, the answer is situational.
🔹 Do you have enough savings left after settling the loan? If you encounter financial difficulties, it may be difficult to turn your property into cash since it is an illiquid asset. Paying out the loan with all of your money might put you in a risky financial position.
🔹 Is your housing loan your only debt? If you also have car loans, personal loans, or credit card debts (which usually have higher interest rates), it makes sense to clear those first before focusing on your home loan.
🔹 Are there penalties for early repayment? There is usually a penalty for paying off a loan early during the "lock-in period" (the first three to five years) that many banks impose. This is necessary because the Banks do not lend money freely; rather, they anticipate a return on their investment.
So before rushing to clear your loan, weigh your options carefully. A strategic approach can save you more in the long run! 💰🏡
But… What if… the Loan Application Rejected? 😞 Don’t Panic! Here’s What to Do Next!
Do not lose hope just yet!
Get the bank's official reasoning for the rejection out of the way first. You may still look into the potential causes on your own if they don't provide a clear response. Some typical "errors" are listed below:
Low Credit Score – Your credit history plays a big role! A poor track record can raise red flags for Banks.
Bounced Cheques – Having two or more bounced cheques in the past 12 months can signal financial instability.
Low Application Score – Banks use software to score applicants based on the details provided. Even small factors can affect your approval chances!
Wrong Bank, Wrong Fit – Not all banks have the same criteria. Some might reject you for having too many credit cards, while others might do so for not having enough! Some banks also don’t finance certain properties or locations.
Some ways in which one can increase the chances of a successful application are:
🔹 Check & Improve Your Credit Score 📊 Credit scores are important. Before reapplying, make sure it passes CCRIS and then pay attention to making it better. But here's a hint—it's also not good to have a credit record that is entirely "blank"! Some credit activity is better than none at all in the eyes of the banks.
🔹 Make Sure Your DSR is Bank-Friendly 💵 DSR, known as the Debt to Service ratio shows the calculation of your debt against your monthly income. Each bank has its allowable DSR hence you should find a bank that suits you well.
The acceptable DSR range is between 50% - 60% which would be below the maximum allowable DSR and hence making it highly likely for the application to get approved.
🔹 Stay Updated with Bank Negara Malaysia’s Latest Rules 📜 Do not depend on out-of-date information from loved ones; bank policies are subject to change. Be sure you comply with the most recent standards by reviewing the most recent borrowing rules.
Applying for a housing loan can feel overwhelming, but with the right prep and knowledge, you can boost your chances of success. And hey, if you get rejected—don’t sweat it! Learn from it, fix what needs fixing, and try again.
Stay informed, stay patient, and before you know it, you’ll be holding the keys to your dream home! 🔑✨
For more information about new Loans / Refinancing request a free quotation for loan legal fees from us today.
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Messrs. Donny Wong & Co.
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Legal Disclaimer
We trust that you have gained some information from this article. If you have any specific questions related to this article, please contact us at askdwc@dwc.com.my.
The article posted is for general information purposes only and should not be construed as legal advice. Facts and circumstances differ from case to case. Please consult your lawyer for specific legal advice and action to be taken.
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