Top tips to get your mortgage approved
Mortgage applications can often be rejected for things that are easily avoidable or can be addressed in advance
Buying a property is an exciting thing, especially when purchasing your first home. For many, part of the buying process will include securing a mortgage for the purchase. Mortgage applications can often be rejected for things that are easily avoidable or can be addressed in advance. Here are some key tips to help you ensure your mortgage application has the best chance of success.
1. RESEARCH THE MARKET
This might be obvious, but it is a step that many skip. Too often buyers go directly to the bank with which they hold their primary account to apply for a mortgage, instead of researching the market to understand what other products are available.
Different banks have different appetites for lending, so you might find another bank offering products that are more suited to your needs and situation.
Ask your friends and family, carry out a Google search, speak to a mortgage broker and to alternate banks. Gather advice and information from different sources before settling – you will learn a lot through this process which will help you select the right mortgage and get approved with the best lender for you.
2. HAVE YOUR DOWN PAYMENT READY
The down payment can be the most challenging part when looking to purchase as it can be a substantial amount of money, depending on the price of the property. In the UAE, you are required to make a down payment of at least 15 per cent (for a citizen) or 20 per cent (for non-UAE nationals).
In order to make sure your application progresses smoothly, it’s important to have the required down payment ready, or at least know where the funds will be coming from when the time comes to transfer them. There are various ways to fund the down payment, such as savings, gifted funds from family and releasing equity from property owned in the UAE and abroad.
If gathering the down payment is something you are struggling with, it is useful to discuss this with an independent mortgage broker as they can often suggest solutions that you may not automatically consider yourself.
3. CHECK YOUR AFFORDABILITY
When applying for a mortgage, the bank will carry out an affordability report, also known as a debt-to-burden ratio (DBR). The point of this is to check that you will be able to meet your monthly mortgage repayments.
While banks have slightly different ways of calculating this, the majority will consider 50 per cent of your monthly salary and then deduct your monthly financial commitments from this amount to see what you have remaining. If you have nothing left, then the application will likely be rejected as your debt ratio is too high.
It is worth keeping this in mind and carrying out a basic calculation yourself before applying for a mortgage. You can also use Mortgage Finder’s affordability calculator to get a rough idea on this.
4. BE HONEST
The final tip, which is perhaps the most important, is to be honest in your application. Make sure you are clear about your financial liabilities, job status and background – because banks will check those details. A mortgage is a substantial sum to lend so banks will do their due diligence before approving your application. If there is anything that you are concerned about then it is worth seeking independent mortgage advice before submitting a formal application.