Foreigners who seek government support to buy investment properties in Dubai do their best to have their mortgage applications approved. It’s just not enough sometimes. Arab banks are scrupulous in their choice of clients, especially when it comes to foreigners. A mortgage is a significant investment for a lender, so they need to be 100% confident in the reliability of the borrower.
What Factors Lead to Mortgage Decline?
Even the most scrupulous and conscientious clients happen to fail to achieve their cherished goal. The thing is that some things go unnoticed or ignored by a potential borrower. You may not give them a lot of weight, but they are most often the decisive point in the rejection of your application. What are these reasons?
Low Paying Capacity
When considering the candidacy of a potential borrower, banks analyze their cost-to-income ratio. This is done for the purpose of calculating the debt burden ratio (DBR).
If the bank sees that the client's financial capabilities are quite low and his current financial situation does not allow him to make regular mortgage payments, he will most likely be refused a loan. Thus, Dubai banks are trying to protect themselves and not deal with doubtful applicants.
Before applying for a mortgage, you should independently assess your financial capabilities, make sure that your salary is enough to regularly repay your loan obligation and meet your own needs and the needs of your family.
Stress testing is a common part of the mortgage process in most countries, including the UAE. Banks want to be sure that even in the worst-case scenario you can still pay your mortgage on a monthly basis. This is an important part of the lender's decision-making process and has a big impact on your mortgage application.
The stress test is designed to see if you can pay off your mortgage if the situation is “stressed,” that is, less predictable than usual.
Banks understand that interest rates rise and fall and personal circumstances change. When you take out a mortgage for 25 years, it is reasonable to assume that at some point during that period, interest may become disadvantageous for a while. Therefore, banks make careful calculations.
If you pass the test, you can be sure of the preliminary approval of your application. Stress test results are known in advance so you and the bank won’t waste any time.
Provision of Unreliable Personal Data
The verity of the information is the first-priority aspect. If the bank determines that you are unclear or dishonest in describing your circumstances, it will be the reason for problems in the future. Make sure you describe yourself clearly and honestly.
Bank employees initiate verification of each client, especially foreign; the fact of misrepresentation will be ascertained in any case, so make sure to provide authentic data.
Questionable Credit History
In many countries around the world, credit rating has a great influence on decisions regarding the approval or rejection of a mortgage application. In Dubai and the UAE, your credit rating is also an important part of your application and is a key factor to take into account. If you have a bad financial history and a low credit rating, this can lead to a rejection of financing.
Zero Credit Rating
Credit histories do not move from one country to another, so the rating in your home country and in the UAE may not be the same. It gets worse when the client has a score of zero. This indicates the absence of any financial activity in the UAE, which can be a negative factor for the lender, as well as the negative score. The bank has no idea of you as a borrower.
Age and Nationality
The age and nationality of the borrower also play an important role. As for the age, an applicant for a mortgage must be at least 21 years old. Most banks in the UAE also set an upper age limit. In most cases, your final payment must be made before you turn 65. If you are a self-employed ex-pat or a UAE citizen – before you turn 70.
The origin matters. There are countries that are subject to sanctions, and UAE banks are unlikely to lend to citizens from there, except in special cases. The list of countries subject to sanctions may change and is not the same for all banks.
Overpricing the Object
After the client has decided on the property, the bank initiates an independent estimation of the real estate unit. This is done to establish its real value. If the bank evaluates the property you want to buy for less than what you offered to pay, it may lead to a discrepancy in the terms of the mortgage, which can make the final transaction difficult. This could lead to an increase in your initial payment or a sudden price reconsideration.
The Issue of Employer and Employment
Your job and the employer you do business with is key to lenders in the UAE. Some points that a bank can take into account when considering your employer or business are below:
- The reputation of the company, including any negative reviews and bad mentions in the media or press;
- History of the company;
- Company size and predicted stability;
- Financial position;
- A Sector of your company’s operations.
It is more convenient for banks to work with trusted companies, whose history and reliability are beyond doubt. They make advantages for such clients willingly.
Resolving employment issues
If you are in a position to influence your company (for example, as an owner), you can consider improvements, such as providing clear financial data. If you are an employee and your company is in a bad financial situation, alternative job options can be considered - but remember that secure employment and the length of your cooperation with the company are also factors taken into account.
Before making any drastic changes, it's worth talking to a mortgage expert if you have any questions about how your employer or company might affect your application.
Buying an apartment in Dubai with a mortgage is a good opportunity to become a homeowner in one of the most progressive cities in the world. Arab banks provide financing to foreigners, but in this matter they are very circumspect and prefer to go the proven and safe way. However, the final decision of the bank depends on the correctness of the prepared documents, the correctness and reliability of the information, as well as the overall reliability of the client. To increase the chances of your application approval, it is best to use the help of a mortgage expert.
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