You've started viewing flats or condos, and before you pay an option fee you want to know what a bank will lend you. That's what an in-principle approval (IPA) is for. It's a bank's written estimate of your home loan, worked out from your income and other debts under limits MAS sets. You get it before you've picked a home. It usually lasts about 30 days, and it doesn't commit you or the bank to anything. This guide covers the bank IPA, and HDB's HDB Flat Eligibility (HFE) letter if you're buying a flat. If you're after the Ministry of Manpower's IPA letter for an Employment Pass or Work Permit, that's a different document, and MOM's own site explains it.
Some banks call it an approval-in-principle (AIP). It's the same thing. The bank is saying that, on the income and debts you've shown, it's prepared to lend you up to a stated amount.
The loan runs over a stated tenure, the number of years you take to repay it. You get the IPA before you've picked a home, so you can view flats or condos with a real budget instead of a guess.
Say you and your partner earn S$8,000 a month between you, all fixed salary, and owe nothing else. If you want a resale HDB flat on a 25-year bank loan, an IPA could show a loan of up to about S$454,700. The worked example further down shows how the bank gets there.
It isn't a loan offer. DBS's IPA page says the IPA isn't a binding document. The final loan still depends on the price and the bank's valuation, among other checks.
OCBC says its AIP is usually based on what you declare about your income and debts, and may or may not use your credit report. So the figure can still move after you find a place. The main reasons are the bank's valuation of that home or a change in your own finances.
You aren't tied to it either. If rates move or another bank offers a better package, you can let the IPA lapse and apply somewhere else.
The document that commits both sides comes later, once you've chosen a home. It's the bank's Letter of Offer, which you accept to take up the loan.
Each bank sets its own validity, and most land at about a month. DBS states 30 days from the approval date for its private home loan IPA. OCBC says its AIP is typically valid for 30 days.
Other lenders set their own periods, so check the expiry date printed on yours.
A month goes quickly once viewings start. Apply when you expect to make offers in the next few weeks, not at the start of a six-month search. If it lapses, you send fresh payslips and the bank assesses you again from scratch.
HDB's HFE letter runs on a much longer clock. It's valid for 9 months from the date it's issued. HDB processes your flat application on the letter you sent in, even if it expires partway through.
The amount comes from rules MAS sets for every lender in Singapore, plus the bank's own credit policy. These are the limits it runs your numbers through.
| Rule | Limit | Applies to |
|---|---|---|
| Total Debt Servicing Ratio (TDSR) | All monthly debt repayments, the new home loan included, up to 55% of gross monthly income | Every property loan |
| Mortgage Servicing Ratio (MSR) | Housing loan repayments up to 30% of gross monthly income | HDB flats, and ECs still within their minimum occupation period |
| Test interest rate | 4% a year, or the loan's own rate if that is higher | Residential property loans |
| Variable income | Cut by at least 30% and averaged over the past 12 months | Bonus, commission, allowances and rental income |
| Loan-to-value (LTV), first housing loan | Up to 75% of the price or valuation, at least 5% paid in cash | Bank loans; lower if the loan runs past age 65 or past 30 years (25 for an HDB flat) |
TDSR adds up every monthly debt repayment you have, the new home loan included. A car loan counts, and so do your credit card bills and any personal loan.
For a private home, TDSR is usually the limit that decides your number. Our guide to TDSR goes through what counts and what doesn't.
Buying an HDB flat? MSR applies as well, and it's normally the tighter of the two. It holds housing repayments to 30% of income, against 55% for all your debts together.
MSR also covers an EC still within its minimum occupation period, the years you must live in it before you can sell.
The bank doesn't test you at the rate you'll actually pay. MAS has it use 4% a year, or the loan's own rate if that's higher. That's why an IPA can come in below a loan you could comfortably repay at today's rates.
Part of your pay may be a bonus, commission or allowance. MAS requires the bank to cut that part by at least 30% and average it over the past 12 months. So S$2,000 a month in commission counts as S$1,400.
Then the bank may read your credit report and look at your job. HDB lists what it weighs for its own loan, and banks look at much the same things:
Back to the example at the top. You and your partner earn S$8,000 a month in fixed salary, have no other debts and want a resale HDB flat with a 25-year bank loan. Here's how the bank gets to its figure:
Once you've found a flat, its price sets a limit too. That's the loan-to-value (LTV) limit, the share of the price or valuation a bank can lend:
Switch to a condo and MSR no longer applies, so TDSR is the only income limit. Here's the same S$8,000 a month on a 30-year loan:
Our in-principle approval estimator does these sums for you. Enter your income, debts, age, tenure and the price. It estimates the loan an IPA could show under TDSR, MSR and LTV, and tells you which of the three is holding you back.
MAS lowers the LTV limit to 55% if the loan runs past age 65. It does the same if the loan runs longer than 30 years, or 25 years for an HDB flat. Our LTV guide has the cash you'd need then.
Each bank keeps its own list, but the core set barely changes from one to the next. DBS's home loan checklist asks for these:
The same DBS list includes the Option to Purchase or the sale and purchase agreement. You'll only have that for the full loan application. For an IPA, the bank works from your income and debts alone.
If you earn commission or bonuses, have 12 months of payslips on hand. That's the period MAS has banks average variable income over.
If you're buying an HDB flat, you can request bank IPAs inside your HFE letter application on the HDB Flat Portal. The income and job details you give HDB there go to the banks you pick. Each bank then contacts you directly with its outcome.
One IPA is unlikely to hurt. MoneySense, the national financial education programme, says checking your own credit report has no effect on your score. But it also says more loan applications go with higher credit risk.
MoneySense suggests keeping enquiries down by limiting how many loans and credit cards you apply for. It adds that taking several new credit facilities in a short time may look like you're overextending yourself.
So compare packages first, then apply to two or three lenders you'd actually use.
Buying an HDB flat? The HDB Flat Portal lets you send IPA requests to any of its five participating lenders while you apply for your HFE letter. They are DBS, Hong Leong Finance, Maybank, OCBC and UOB.
HDB says the service is free, though each lender still assesses you on its own.
Get your own report before you apply. It costs you nothing in score terms, and you'll see any late payment or old balance before the bank does. Our credit score guide explains how to read the report and fix the common problems.
Buying an HDB flat with a bank loan, you'll hold all three at some point. Each comes from a different place and answers a different question.
| Bank IPA | HDB Flat Eligibility (HFE) letter | Letter of Offer | |
|---|---|---|---|
| Issued by | A bank or finance company | HDB | The lender you choose |
| What it tells you | An indicative loan amount | Whether you can buy, your CPF housing grants and your HDB loan amount | The confirmed loan and its terms |
| How long it lasts | Usually around 30 days | 9 months from issue | Set by the lender, check the letter |
| Binding | No | HDB processes your flat application on it | Yes, once you accept it |
| When you need it | Before you start making offers | Before a seller grants you a resale OTP, and when you apply to buy from HDB | Before you exercise a resale OTP or sign a new flat's Agreement for Lease |
The HFE letter covers the HDB loan side. HDB works out its loan at 3.0% a year or its own loan rate, whichever is higher. It caps your instalments at 30% of income and lends up to 75% of the price or value.
If the flat's remaining lease doesn't cover the youngest buyer to age 95, HDB scales that 75% down. The lease also limits how much CPF you can use, whichever lender you pick.
The repayment period is the shortest of three: 25 years, 65 minus your average age, or the flat's remaining lease minus 20 years. An HDB loan also has a household income ceiling of S$16,000 a month for families.
Because HDB's floor is 3.0% and the banks' is 4%, the same income can show a bigger HDB loan. On S$8,000 a month, S$2,400 a month over 25 years supports about S$506,100 at 3.0%, against about S$454,700 at 4%.
The 75% LTV cap still applies on top, so on a S$600,000 flat both stop at S$450,000. Our HDB loan vs bank loan comparison weighs up the rest. The HFE letter guide walks through the application.
Apply for your HFE letter first, and request your bank IPAs in the same application. A seller can't grant you an Option to Purchase (OTP) until you hold a valid HFE letter.
HDB says processing takes up to a month once it has all your documents. It can take longer in the run-up to a sales launch.
Once the seller grants the OTP, you have 21 calendar days to exercise it. The option fee can't be more than S$1,000, and you lose it if you let the OTP expire.
If you're using a bank loan, those 21 days are when you turn the IPA into a Letter of Offer. You can do it with the bank directly, or through HDB's Convert IPA to LO e-Service.
That e-Service opens once you have the outcome of your Request for Value, HDB's valuation of the flat. HDB's OTP notes say the Letter of Offer must be dated before the day you sign the acceptance.
You need a valid HFE letter to apply for the flat. If you'll take a bank loan, you need the Letter of Offer before you sign the Agreement for Lease.
Taking an HDB loan instead? Expect HDB to review your finances again near completion. It says it may reduce the loan if your position has changed.
There's no HFE letter for a private home, so the bank IPA is your budget check. Get it before you pay an option fee.
After that, you're racing the option period to secure a Letter of Offer. That's a bad moment to learn the bank will lend less than you assumed.
For an EC bought from the developer, MSR applies and HDB doesn't lend. The loan has to come from a bank or finance company.
The bank checks your numbers again when you apply for the actual loan. These are the usual reasons the figure drops between the two:
Between the IPA and the Letter of Offer, hold off on the car and on furniture bought in instalments. Pay every bill on time while you wait. If a job change is coming, tell the bank before it finds out from your payslip.
It's short for a home loan in-principle approval. That's a bank's written estimate of how much it will lend you, worked out from your income and debts under MAS's TDSR and MSR limits. It doesn't bind you or the bank, and you get it before you choose a home.
Each bank sets its own period, usually around 30 days. DBS gives 30 days from approval and OCBC says typically 30 days. HDB's HFE letter is a separate document and lasts 9 months from the date it's issued.
One application is unlikely to matter much. MoneySense says checking your own report has no effect, but more loan applications go with higher credit risk. Apply to two or three lenders you'd actually use rather than to every bank at once.
Only if you plan to take a bank loan. The HFE letter covers HDB's side: whether you can buy, your grants and the HDB loan. You can ask up to five participating lenders for an IPA in the same HFE application on the HDB Flat Portal. HDB doesn't charge for it.
No. MOM issues an IPA letter for work passes such as the Employment Pass or a Work Permit. A bank IPA is about how much you can borrow for a home, and the two documents are unrelated.
This is general financial information for Singapore, not personal financial advice. Figures change, so verify current rates against the official sources above before acting. See our full disclaimer.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).