Here are the 6-steps you need to take note of when you buy a new home directly from a developer
If you work backwards, you need to obtain an Approval in Principle (AIP) from a bank as early as 90 days before signing the actual option to purchase (we will tell you why this is so important later)
*The AIP is essentially a formal or informal approval from a bank to extend you a loan within the next 30-90 days, based on your credit history and financial health. Think of it as ‘ensuring you can get a loan’ before the rest of the steps. To avoid any nasty surprises, always give the banks a full set of documents.
The next step is to do research on your dream home. If you haven’t already done so, you can visit DREA’s Condo Guide here to have a basic understanding on how you can choose the ideal condo. This step can be difficult for most but DREA.sg streamlines this process for users, making it much, much easier.
Once you have decided on your future home, you now need to sign the Option to Purchase plus pay for the 5% – 10% Option Fee in cash. But before you do so – remember to confirm with your bank that they will be able to issue a bank loan letter of offer within 14 days of exercise of option. Many tend to regret paying the option fee when they realize they are unable to get a bank loan (The AIP in Step 1 is super important!)
The developer will send the Sale & Purchase (“S&P”) Agreement within the next 14 days. The option to purchase in Step 3 is valid for 3 weeks from the date of delivery of the Sale & Purchase Agreement. If the option is not exercised before it expires, it will be considered as a non-exercise of option and 25% of the option fee will be forfeited to the developer. Do note that the 3 weeks’ validity begins from the date of delivery of the S&P Agreement
To proceed, you need to sign the S&P agreement and return it to the developer. This is where you will have to pay the remaining 10% – 15% of the down-payment in cash and/or CPF. Some developers may allow the payment to be made within 8 weeks of signing of the Option to Purchase. Check with the developer you are dealing with to confirm when the deadline for downpayment will be.
The final step (We get how painful it is!) is to pay any Stamp Duty and Additional Buyer’s Stamp Duty (if applicable) on your purchase. Important to note that this has to be paid upfront in cash, so do budget for that.
In summary, there are 3 documents and 3 payments to take note of
If you are buying a resale home, look out for our guide on Singapore Property Resale homes next week or download a copy of our 1H 2016 Singapore Property Review for everything you need to know before buying your home.