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  • Market Trends
  • PropEx
  • Sep 06, 2020

Everything You Need to Know about Home Loan Pre-Approval in Dubai

[vc_row][vc_column][vc_column_text]When it comes to buying a home in Dubai, there are numerous factors one has to consider and matters to take care of. Among them, home loan takes the top spot. The entire search process of home-buying is solely based on it. Of course, other factors such as family requirements, location, facilities, etc. matter, but finances take the lead. If you don’t have enough, you wouldn’t be able to secure the deal you have been eyeing. Also, in order to get a refined result on any property portal like ZoomProperty.com, you are required to enter the minimum and maximum budget. This is only possible if you have gotten your home loan pre-approved. In simple words, a pre-approved home loan is granted in advance to the borrower even before they have started to look for a property, let alone finalising it. It assures them that they will have funds ready when the time comes to make the purchase. This post contains all the information that you need to know about home loan pre-approval in Dubai:

Reasons Why You Should Get Home Loan Pre-Approved

  • To begin with, it will help you to have a clear idea about the budget for your new home. Therefore, there will be no heartache that you could have experienced in the later stages after finding out that your dream home is way out of your budget bracket.
  • As property rates vary from area to area, with a clear budget, you will be able to select a community where you can buy a home without burning a hole in your pocket.
  • Getting a home loan pre-approved can streamline the entire process. With finances already in place, the rest of the process will become relatively easier to manage.
  • A pre-approved home loan ensures enhanced security. The buyer needs to deposit 10% amount when signing the sales agreement. If they fail to arrange funds at the time of purchasing the property, the amount paid initially is not refundable. With approved funds, there will be no such issue.

Up-Front Costs

Before applying for a home loan, it is important for the buyer to have an understanding of upfront costs. It includes down payment, land department fees and commission of the real estate agency. According to the UAE Central Bank, expats are required to deposit at least 25% of the price of the property, if it’s sale value is under AED 5 million. Other than that, 4% DLD transfer fee and 0.25% mortgage registration is also calculated on the amount of loan approved. Lastly, 2% commission is to be paid to the real estate agent. In some cases, the buyer may also be required to pay a loan establishment fee, which can be up to 1% of the amount of loan.

Getting Loan from a Mortgage Broker or Bank – The Right Choice

Both these options have their own set of pros and cons. Carefully evaluate them before making a final call. If you are opting for the bank, be mindful that different banks have different policies. Moreover, their charges may also vary. Also, they tend to be strict in terms of meeting eligibility criteria and prerequisites. On the other hand, mortgage brokers may show more flexibility in terms of eligibility criteria. Moreover, they can also advise you to select an option that is more suitable for you. However, in the end, it all comes down to your preference.

Criteria for Getting Home Loan Pre-Approved

As per the edibility criteria, banks and mortgage brokers take into consideration the credit history of the applicant. Other than that, their financial health and outstanding debts are also reviewed. Always remember that some banks may approve loans to applicants who have a certain monthly income. Apart from financial conditions, the lender asks the applicant for important documents that include bank statements, passport, visa copy, emirates ID etc. An important point to note here is that even if you meet the criteria and your application has been approved, it doesn’t mean you will be provided with the funds immediately. At first, you will be given a “pre-approved letter”. This document will serve as a testimony to your borrowing capacity. Thus, you can show it to the sales agents and start exploring apartments for sale in Dubai.

Charges for Processing Loan Application

The applicant/borrower is required to pay a pre-approval fee of minimum AED 1,000 for processing their application. Moreover, they may also have to deposit an additional amount at the time of loan disbursement. It is called the “final approval fee”. Generally, it amounts to 1% of the total loan amount.

Validity Period

Pre-approvals for home loans in the UAE comes with an expiry date or a validity period, which varies from institute to institute. Generally, the validity period is two months. All in all, obtaining a pre-approval for a home loan can save you from a lot of troubles in the later stages. Thus, it is always recommended to get assurance on the home loan before exploring listings.[/vc_column_text][/vc_column][/vc_row]

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