ONE in three home buyers are unaware of or do not understand the new total debt servicing ratio (TDSR) framework, a recent survey has revealed.
The survey by UOB found that home buyers' top two uncertainties over the new TDSR framework are how the existing cooling measures affect their loan application and how the framework applies to their personal situations.
The TDSR was introduced last June by the Monetary Authority of Singapore (MAS) to ensure that all debt obligations of borrowers do not exceed 60 per cent of their gross monthly income, in a bid to encourage prudent borrowing by households and to strengthen credit underwriting standards by financial institutions.
"Ten months on, our survey shows there is still a significant group of potential home buyers who are not familiar with the rules," said Chia Siew Cheng, head of secured loans at UOB Group.
"Most of the time, home buyers bring inadequate or incorrect documents to support their application or are not aware that loans are granted based on an assessment of their total outstanding debt including credit cards," she said.
Some 210 people were surveyed by UOB between March 20 and 27. They include Singaporeans and permanent residents aged 21 to 65 years who have bought a property in the past nine months or are looking to purchase a property within the next two years.
About 30 per cent were looking to buy a private condo.
There also seems to be a gap between what borrowers think they know and what they truly know.
While some 64 per cent of the respondents claimed that they are aware of how debt is calculated in the new framework, UOB observed that potential borrowers often do not bring along all the relevant documents such as their credit card statements, vehicle loans and guarantor notes.
To deal with the situation, UOB said that it came up with a home loan application checklist for its customers.
To simplify the home loan application process, UOB is also working with several industry bodies to access more comprehensive credit bureau information.
The survey also showed that first-time home buyers tend to do their own research online while experienced home buyers prefer to engage a mortgage specialist to find out more about the application process and suitable loan options.