Financial regulators will soon issue a detailed FAQ to help banks determine when borrowers with unavoidable past housing ownership can qualify for first-time homebuyer loan benefits. Although the August 13 real estate measures allowed exceptions—such as inheriting a property stake as a minor—banks have delayed applying the relief amid uncertainty over which cases truly qualify.
Two illustrative cases highlight the confusion. One borrower inherited a home share in childhood, sold it before turning 20 and later applied for a first-time mortgage rate but has been stuck in review because his credit file still shows prior ownership. Another obtained a pre-sale right that was never converted into actual property ownership when the project collapsed, yet a lender questioned his eligibility for preferential terms.
Under the existing rules, general homebuyers in regulated areas face a maximum LTV (loan-to-value) cap of 40%. First-time buyers, by contrast, can secure up to 70% LTV, while those in non-regulated regions may borrow as much as 80% of a home’s value. On a ₩600 million property in a regulated zone, that LTV difference translates into a potential ₩180 million gap in financing capacity.
But the headline LTV limit is only part of the picture. Borrowers must also satisfy total debt-service-ratio (DSR) requirements, regional loan caps and each bank’s underwriting standards. A hypothetical buyer whose DSR permits a ₩300 million loan would see financing jump from ₩240 million under the standard 40% LTV rule to ₩300 million with a 70% allowance—an increase of ₩60 million.
To eliminate inconsistent decisions across lenders, the Financial Services Commission plans to distribute this month a consolidated FAQ document, responding to questions submitted by the banking sector. It will clarify which “unavoidable” ownership histories—beyond the already accepted minor-inheritance scenario—merit first-time borrower status and outline the evidence applicants must provide.
A senior executive at one commercial bank noted that without clear guidelines, institutions risk diverging interpretations that could confuse consumers. “Borrowers with similar backgrounds should receive consistent treatment,” the executive said, “and banks need precise instructions on exception criteria and required documentation.”