The approval process for mortgages is also frustrating for first-time home buyers. As a result, we've put together this guide to clarify what you need to know about mortgages and walk you through the steps of a standard mortgage preapproval procedure.
The United Arab Emirates is becoming increasingly popular as a business destination, especially in Dubai and Abu Dhabi. As a result of this trend, the UAE mortgage sector is now well-established, with both foreign and local banks providing home loans to UAE residents and expatriates.
What are the steps involved in getting a mortgage approved?
Due to a variety of factors, the lending process may differ from one borrower to the next. As a result, your experience could vary slightly from the one described below. The six measures that typically occur before a bank approves a home loan are outlined below.
Preapproval for a Mortgage
When a bank examines your financial status (particularly your income, properties, and debts) to see if you're a good candidate for a loan, they call it pre-approval. They'll even tell you how much money they're able to lend you and provide you with a letter of pre-approval. At this point, the lender will check your credit reports and scores.
Viewing of the House and Purchase Agreement
You can shop more confidently within the price range once you've been pre-approved for a certain number. That takes us to the second big phase in the mortgage approval process: looking for a home. At this point, your mortgage lender isn't very interested.The house hunting work is primarily done by the buyers and their real estate agents.
Application for a Mortgage
Since most banks use the same type, this is a simple step in the process. The application requests information about the property being purchased, the type of loan being used, and you, the borrower.
Processing of Mortgage Loans
Your file will pass into the approval stage once you have a purchasing agreement and a completed loan application. Another crucial step in the home loan approval process is this. Loan processors gather a number of documents about you, the borrower, as well as the property you're buying. They'll go over the file and make sure it has all of the necessary documentation for the underwriting process.A credit report or a home appraisal may be ordered by the loan processor to assess the property's worth.
Underwriting a Mortgage
During the mortgage approval process, the underwriter is the most important decision-maker. If the loan does not meet those pre-established conditions, he has the authority to refuse it. The underwriter can double-check that the property and the borrower meet the eligibility criteria for the particular mortgage product or service being used, as well as assess the risk level associated with your loan.
Approval and Closing of a Mortgage Loan
If the mortgage underwriter is confident that the borrower and the property being purchased follow all of the guidelines and specifications, he will mark the transaction as "clear to close." This indicates that all conditions have been met, the loan can now be financed, and the approval process has come to an end. The final phase in the mortgage approval process is closing.
What are the various forms of mortgages available in the United Arab Emirates?
Fixed-rate and variable-rate mortgages are available in the UAE. Fixed terms are typically five years long, but they may be as short as one year. The contract switches to the bank's variable rate at the end of the fixed term. Fixed-rate mortgages give you clarity about the size of your payments over a set period of time, but variable-rate mortgages are worth considering if interest rates are expected to decline. The loan is normally for a period of 25 years, and it must be repaid by the age of 70.
What are the mortgage rates in the United Arab Emirates?
Mortgage rates in the UAE differ greatly depending on the lender, the land, and the borrower's financial situation. Rates will begin at 2.75 percent for a one-year fixed rate, 3.89 percent for three years, and 3.99 percent for five years beginning in 2020. Since these are the lowest prices on the market, you will have to pay a lot more. The mortgage market in the UAE has slowed in recent years, as many buyers have chosen to purchase homes directly from developers using payment plans rather than mortgages. Mortgage rates in the UAE can fluctuate dramatically over time, depending on the economy and oil prices in the region.
How do I apply for a mortgage in the United Arab Emirates?
You may either contact banks directly or seek advice from a mortgage broker to apply for a home loan. In cities like Dubai and Abu Dhabi, you'll find comparison websites where you can compare offers from a variety of lenders. A mortgage broker can be a valuable resource. They'll be able to guide you through the complexities of the local market and find you the best deal for your needs. In the UAE, mortgage applications are usually handled within a few weeks.
What documents are necessary to obtain a Mortgage Pre-Approval in the United Arab Emirates?
The paperwork you'll need to apply for a mortgage can vary depending on the bank you go with. The following information is likely to be requested by banks:
- a certified copy of your passport
- Proof of UAE residency as well as proof of your current address are needed.
- Evidence of salary, bank accounts, or a tax return are both examples of financial records.
Advantages in obtaining a Pre-Approval
The advantages of obtaining a pre-approval are unquestionably numerous and necessary for home buyers. If you already have a pre-approval, you'll know what you can afford when you start looking for a home. You have a good understanding of what payments are needed up front and how much money you'll need to complete a transaction. You'll also know how big your monthly payments will be, giving you peace of mind when speaking with brokers and bargaining with sellers.
Furthermore, you would be in the best possible place to make an offer when the right property comes along.
The benefits of a pre-approval are also advantageous to sellers. When a seller receives a bid with a pre-approval, the seller may understand the buyer's readiness. If you're a seller, you don't just want to get the best price for your home; you also want to make the sale process as easy as possible for both you and the buyer. A buyer who has been pre-approved for a mortgage is the ideal patron for you.
As a buyer, you'll avoid the heartbreak of finding your dream home just to lose it because you didn't have a mortgage pre-approval in place before you made a bid.
Taking out a bank loan is a major move that is often fraught with anxiety and tension. When you combine this with the decision of which property to purchase, which area to buy it in, and how much to invest, you have a major life event on your hands, and it is likely the most important decision you will ever make.
Many buyers make the mistake of viewing and making an offer on a home without first obtaining a pre-approval mortgage. This just causes delays and a seller who does not take the bid seriously, resulting in the property being purchased by a competitive buyer.
Obtaining a pre-approval is just the first step in the mortgage application process, and there are several potential snags along the way. If it's changes to a bank's terms and conditions, a low valuation that needs to be challenged, a non-resident seller with no bank account, issues with the NOC, liability letters that are about to expire, or a variety of other potential stumbling blocks, a mortgage broker can work closely with their in-house sales progression team to guide you through the whole process to ensure your interest is protected.
These are the six main stages that arise in the process of obtaining a mortgage loan. We hope this guide to the mortgage pre approval process was helpful, and in case of doubt, contact our experts at Dhanguard.