Common Mortgage Application Mistakes to Avoid: Your Complete Bank Rate Comparison Guide
The difference between mortgage approval and rejection often comes down to avoiding preventable mistakes during your application process. For Singapore home buyers, understanding these critical errors—and knowing how to compare bank rates effectively—can save you thousands of dollars and months of frustration. Homejourney's bank rate comparison platform helps you navigate this process safely, ensuring you make informed decisions backed by verified information and transparent guidance.
This guide covers the nine most common mortgage application mistakes Singapore buyers make, how they impact your loan eligibility, and practical strategies to avoid them. Whether you're a first-time buyer or refinancing, these insights will help you secure the best possible loan terms while maintaining the safety and trust that Homejourney prioritizes.
Mistake #1: Not Getting Pre-Approval Before Making an Offer
One of the most critical errors first-time buyers make is placing an option fee on a property before understanding their actual borrowing capacity. Many assume the bank will lend them whatever they need, only to discover later that their loan application gets rejected or approved for significantly less than expected.[1]
An Approval-in-Principle (AIP) from your bank confirms your maximum loan amount based on your income, existing debts, age, and the bank's lending criteria. Without this, you risk losing your option fee deposit if your loan application fails.[1] Getting pre-approved protects your financial position and gives you negotiating power when making an offer.
How to avoid it: Contact your bank or use Homejourney's Bank Rates page to compare pre-approval requirements across DBS, OCBC, UOB, HSBC, Standard Chartered, and other major lenders. You can calculate your eligibility instantly using our mortgage eligibility calculator and understand exactly how much you can borrow before viewing any properties.
Mistake #2: Ignoring TDSR and MSR Rules
Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) are regulatory limits that determine how much banks will lend you. TDSR caps your total monthly debt repayments at 60% of your gross monthly income, while MSR limits housing loan repayments to 30% of gross income.[1] Many buyers underestimate how these ratios restrict their borrowing power, especially if they have existing car loans, credit card debt, or personal loans.
Exceeding these thresholds means automatic loan rejection, regardless of your property choice or down payment. This is a hard regulatory limit, not a guideline banks can waive.[1]
How to avoid it: Before applying, calculate your TDSR and MSR carefully. List all existing monthly debt obligations—car loans, credit cards, personal loans—and add your projected mortgage payment. If your total exceeds 60% of gross income (or 30% for housing alone), you need to either reduce debt or increase income before applying. Homejourney's eligibility calculator factors in these ratios automatically, giving you a realistic picture of your borrowing capacity.
Mistake #3: Submitting Incomplete or Inaccurate Documentation
Inaccurate or incomplete documentation is the fastest way to trigger a loan rejection.[2] Banks require extensive paperwork—pay stubs, tax returns, bank statements, employment letters, and CPF statements—and any missing documents or discrepancies can derail your application. Even small errors like outdated employment information or missing bank statements can cause delays or rejections.[2]
Lenders rely on precise documentation to assess your creditworthiness accurately. Errors may lead to misjudged risk levels, potentially resulting in inappropriate interest rates or loan denials.[2]
How to avoid it: Gather all required documents well in advance and double-check every detail for accuracy. Create a comprehensive checklist including recent pay stubs (last 3 months), tax returns (last 2 years), bank statements (last 3-6 months), employment letter confirming your position and salary, CPF statement, and proof of any additional income. Maintain open communication with your lender throughout the process to address any document-related concerns promptly.[2] If applying through Homejourney's multi-bank application system, you can use Singpass/MyInfo integration to auto-fill your application in seconds, significantly reducing errors and speeding up approval.
Mistake #4: Not Checking Your Credit Report Before Applying
Your credit history directly influences loan approval, interest rates, and loan terms. Banks conduct detailed credit assessments, and inaccuracies on your credit report can unfairly damage your application. Many Singaporeans don't realize they have credit report errors until after a loan rejection.[2]
Negative credit events like missed payments, defaults, or high credit utilization can stay on your report for years. Even one missed payment can significantly impact your mortgage application odds.[2]
How to avoid it: Request your credit report from the Credit Bureau Singapore (CBS) at least 3-6 months before applying for a mortgage. Review it carefully for any inaccuracies and dispute errors immediately. If you have past credit issues, work on improving your credit score before applying. Pay all bills on time, reduce credit card balances to below 30% of your credit limit, and avoid applying for multiple new credit products close together, as each application triggers a hard inquiry that temporarily lowers your score.[7]
Mistake #5: Overstretching on Monthly Installments
Just because a bank approves you for a certain loan amount doesn't mean you should borrow the maximum. Many first-time buyers in Singapore stretch themselves financially to buy the "dream home," only to discover they have little room for lifestyle expenses, emergencies, or future rate increases.[1][3]
In 2013, the Monetary Authority of Singapore (MAS) warned that 5-10% of Singaporeans with mortgages were overstretching themselves financially.[3] Even if you don't default, over-leveraging yourself creates unnecessary stress and can impact your quality of life.
How to avoid it: Keep total housing costs (loan repayment, conservancy fees, property tax, insurance) at a comfortable level—ideally 25-30% of your gross income rather than the maximum 30% MSR allows. Plan for future interest rate increases; if rates rise by 2%, can you still afford your monthly payments? Build in a buffer for emergencies and unexpected expenses. Use Homejourney's affordability calculator to understand not just what you can borrow, but what you can comfortably afford.[1]
Mistake #6: Not Comparing Bank Rates and Loan Products
Many Singaporeans apply for home loans at a single bank—often the one where they have their salary account—without shopping around. This is a costly mistake. Interest rate differences between banks can amount to tens of thousands of dollars over a 25-year mortgage.[3]
Banks offer different loan products with varying rate structures (SORA-based, fixed-rate, or board rate), lock-in periods, and prepayment penalties. An HDB loan might feel "safer," but it typically carries higher interest rates than bank loans.[3] Without comparison, you could end up paying significantly more than necessary.
How to avoid it: Compare rates across all major Singapore banks—DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, CIMB, RHB, and others—before committing to any loan. Homejourney's Bank Rates page displays real-time rates from all major lenders, allowing you to see exactly which bank offers the best terms for your situation. You can also submit one application through Homejourney and receive competing offers from multiple banks simultaneously, letting banks compete for your business. This transparency ensures you get the lowest possible interest rate.
The chart above shows recent SORA (Singapore Overnight Rate Average) trends, which directly impact floating-rate mortgages. Understanding these trends helps you decide between fixed and floating rate products. A mortgage broker through Homejourney can help you interpret these trends and choose the right rate structure for your circumstances.
Mistake #7: Misunderstanding HDB vs. Bank Loan Differences
HDB loans and bank loans have fundamentally different structures, costs, and benefits. Many first-time buyers don't understand these differences and default to HDB loans assuming they're safer or cheaper—when the opposite is often true.[3]
Bank loans typically offer lower interest rates than HDB loans, though they require a higher down payment (20-25% vs. 10% for HDB). HDB loans have lower prepayment penalties (none, compared to banks' 1.5%), but higher ongoing interest rates.[3] The choice depends on your financial situation and future plans.
How to avoid it:
