First Home Buyer: How to Apply for a Housing Loan in Malaysia?

1. Thinking of Buying Your First Home in Malaysia?
2. Step 1: Know How Much You Can Borrow
   1. What is Loan-to-Value (LTV)?
   2. What is Debt-Service-Ratio (DSR)?
3. Step 2: Estimate Your Ideal Property Price Based on Income
4. Step 3: Check Your Financial Health Before Applying
   1. Review Your Monthly Commitments
   2. Check Your Credit Score
   3. Strengthen Your Profile Before Applying
5. Step 4: Understand the Types of Loans in Malaysia
   1. Basic Term Loan
   2. Semi-Flexi Loan
   3. Full-Flexi Loan
   4. Islamic Home Loan
   5. Fixed Rate Loan
6. Step 5: Prepare the Required Documents
   1. For Salaried Employees
   2. For Self-Employed Applicants
   3. Other Supporting Documents
7. What Happens After You Have Submitted Your Home Loan Application?
   1. Loan Submission
   2. Bank’s Internal Assessment
   3. Approval Timeline
   4. Letter of Offer (LO)
   5. Loan Agreement & Disbursement
8. Final Tips Before You Commit
   1. Get Pre-Approval First
   2. Don’t Overstretch Your Budget
   3. Compare Multiple Banks
   4. Understand the Full Costs
   5. Check Available Government Incentives
9. Conclusion

Buying your first home is an exciting milestone, but it can also feel confusing when you’re unsure where to begin, especially when it comes to applying for a housing loan. If you’re a young professional or a couple earning between RM5,000 and RM6,500 a month, chances are you’re ready to move out and get a place of your own. However, with rising property prices and financial commitments, obtaining a housing loan becomes the first step in making that dream a reality. This guide is written for Malaysians buying their first home. We’ll walk you through everything you need to know – from how much you can borrow, what documents you need, to choosing the right type of loan.

Before you start house-hunting, you need to know how much loan you can actually get from the bank. Two key things determine this: your Loan-to-Value (LTV) ratio and your Debt-Service Ratio (DSR).

The LTV ratio tells you how much of the property price a bank is willing to finance.

• For most first-time buyers in Malaysia, banks offer up to 90% financing.
• Some government schemes, like Skim Jaminan Kredit Perumahan (SJKP), offer up to 100% financing if you qualify.

📍For example, if the home you want costs RM400,000 and the bank offers you 90% LTV, they’ll loan you RM360,000. You’ll need to pay the remaining RM40,000 (10%) as your down payment.

DSR is a formula banks use to check if you can afford the loan based on your current net monthly income and financial commitments.

DSR Formula
(Total Monthly Commitments ÷ Net Monthly Income) x 100

Here’s what is included in the “monthly commitments”:

• Car loan
• PTPTN
• Credit card minimum payments
• Personal loans
• The new housing loan you are applying for

Most banks prefer your DSR to be below 60%. If it’s too high, your loan may get rejected, or the bank may offer a lower loan amount.
📍Example, If your monthly net income is RM6,000 and your total monthly commitments are RM3,500 : DSR = (RM3,500 ÷ RM6,000) x 100 = 58.33% (Generally accepted)

Click here to calculate your DSR

What DSR can affect your home loan?
Click here to Understand Debt-to-Service Ratio (DSR) in Malaysia: What It Means for Your Home Loan

Now you understand about LTV and DSR, the next step is to figure out how much you can afford to spend on a home based on your income.

Here’s a simplified guide to help you understand what kind of property price range you can afford, based on your income.
This example assures:

• 90% Loan (LTV)
• 35-year loan tenure
• Interest rate 4.5%
• Minimal debt commitment (DSR within the bank’s range)

Remark: The interest rate is dependent on market.

Aside from the down payment, first-time buyers should also prepare for other costs:
• Legal fees and stamping duties (can be partially waived for first-time buyers)
• Loan agreement & valuation fees
• Basic renovations or furnishings
These can add another 5-10% on top of the property price, so it’s smart to keep a buffer in your budget.
Use home loan calculators to understand your monthly instalment.

Before submitting a loan application, it’s important to check whether your finances are in good shape. This helps to increase your chances of getting approved smoothly.

The bank will look closely at your monthly debts. Here’s what they count:

• Car loans
• PTPTN loans
• Credit card minimum payments
• Personal loansIf these take up a large portion of your income, it can push your DSR too high and lead to rejection.

What you can do:

• Pay off small debts early
• Avoid applying for new credit cards or loans before your housing loan

You’ve probably heard about this, but what is a Credit Score? In short, it’s a number banks use to assess how trustworthy you are when applying for a loan, whether it’s a housing loan or a credit card. The higher your score, the better your chances of getting approved. There’s no one-size-fits- all formula to calculate your credit score, as different credit reporting agencies use their own systems.

However, most of them consider a few factors when evaluating your credit health:

• Late payments
• Missed loan instalments
• Outstanding balances
• New credit applications in the past 12 months
• Legal track record

If your credit report shows a red flag, it could affect your approval even if your income and DSR are okay.

How to check credit score:
Sign up for a free or paid report at ctoscredit.com.my or bnm.gov.my/ccris

Even if your income is average, you can improve your loan approval chances by:

• Keeping your DSR below 60%
• Avoiding late payments
• Maintaining low credit card usage (below 30% of your limit)
• Having some savings for the down payment and fees

Some banks will also look at your EPF savings, especially for those with lower fixed incomes but good financial benefits.

In Malaysia, there are several types of housing loans or mortgage options you can choose from. Each one works differently depending on how you want to manage your payments and interest.

A Basic Term Loan is the most straightforward type of housing loan.

• You pay a fixed monthly loan amount every month based on your agreed loan terms.
• Early or extra repayments are usually not allowed, or may come with penalties.
• Once your repayment schedule is set, it stays the same throughout the loan tenure.


✅ This type of loan suits buyers who want a simple and fixed repayment plan.

A Semi-Flexi Loan offers a bit more flexibility than a basic loan.

• You can make extra payments whenever you have extra money.
• These extra payments help reduce your loan interest and shorten the loan period.
• However, if you want to withdraw the extra money later, you may need to request it through the bank.

✅ This option is good for people who want some freedom to manage their payments while still sticking to a fixed schedule.

A Full-Flexi Loan gives you the most control over your loan repayment.

• You can deposit extra money into your loan account anytime to reduce interest.
• You can also withdraw the extra money anytime, just like a savings account.
• It usually requires you to maintain a current account with the bank.


✅ This loan hits buyers with variable income or those who want the option to pay more and save on interest.

Islamic home loans follow Shariah principles, which means they don’t charge interest.

• Instead, they use a profit-sharing model such as Murabahah (cost-plus sale).
• The selling price and profit are upfront, so your repayments are fixed.


✅ It is structured differently, but functions similarly to conventional loans.

A Fixed Rate Loan keeps your interest rate the same throughout your loan period.

• Your monthly instalment doesn’t change even if market rates go up or down.
• This helps with budgeting and gives you more financial stability.

✅ This Loan is ideal if you prefer to have consistent payments every month.

💡 Tips: If you’re a first-time homebuyer, you might also want to check out [Government Incentives for First-Time Buyers like Skim Jaminan Kredit Perumahan (SJKP)] and stamp duty exemptions. These can increase your loan eligibility and reduce upfront costs.

Before you apply for a housing loan, make sure you have all the necessary documents ready. Missing or incomplete documents are one of the most common reasons loan approvals get delayed.

Here’s what you’ll typically need:

A Basic Term Loan is the most straightforward type of housing loan.

• Identity Card (IC) – front and back copy
• Latest 3-6 months’ payslips
• Latest EPF statements
• EA From or Income Tax Form (BE Form)
• Letter of Employment / Offer Letter

• Identity Card (IC) – front and back copy
• Latest 6 months’ bank statements
• Business Registration (SSM) Certificate
• Form B and Latest Tax Returns
• Audited Financial Statements

• Sales & Purchase (S&P) Agreement
• Property details
• Existing loan statements


💡 Tips:

• Double-check that your documents are clear and updated.
• Avoid discrepancies between payslips, EPF contributions, and bank statements.
• Prepare soft copies in PDF format for easy online application.

Once you’ve decided on your preferred bank or mortgage broker, the first step is to submit your housing loan application along with all the required documents. The bank or broker will review your application to ensure everything is complete and accurate before proceeding. If anything is missing or unclear, they’ll contact you for clarification to avoid delays in the approval process.

The bank will evaluate your application based on several factors:

• Debt-Service Ratio (DSR): Whether your income can support the loan.
• Credit score: From CTOS/CCRIS to check your repayment history.
• Employment Stability: Consistent income and job security.
• Property Valuation: The bank ensures the property price matches its market value.

💡 Tips: A healthy DSR and a clean credit score record increase your approval chances.

For most of the banks, the approval process takes about 7 to 14 working days. If there are missing documents or high-risk factors, it may take longer.

If your loan is approved, the bank will issue a Letter of Offer (LO) containing:

• Approved loan amount
• Interest rate
• Repayment tenure
• Monthly instalment amount
• Terms and conditions

🚨 Important: Review the LO carefully before signing. If you’re unsure, seek clarification from the bank officer or broker.

After you accept the Letter of Offer:

• Sign the Loan Agreement prepared by the bank’s appointed lawyer.
• Once completed, the bank will disburse the loan to the property developer or seller.
• Congratulations! You’re officially a step closer to owning your first home!

(Click here to find out what if your home loan application get rejected.)

Before you sign your loan agreement and make one of the biggest financial commitments of your life, here are a few practical reminders.

Secure a pre-approved loan to know exactly how much you can borrow before house-hunting. This saves time and helps you focus on properties within your budget.

Aim for monthly instalments that take up no more than 40~45% of your income. Always leave room for other commitments like savings, emergencies, and lifestyle needs.

Don’t settle for the first loan offer you get. Compare interest rates, loan packages, and terms from at least three different banks.

Aside from your down payment, factor in legal fees, stamp duty, Memorandum of Transfer (MOT), renovation costs, and moving expenses to avoid unexpected financial stress.

First-time buyers can enjoy benefits like Skim Rumah Pertamaku (SRP) and stamp duty exemptions. These incentives can help reduce upfront costs and improve loan approval chances.

Applying for a housing loan in Malaysia doesn’t have to be complicated. Once you understand how much you can borrow, prepare the right documents, and choose the loan type that fits your needs, this process becomes much easier.