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Top Mortgage Mistakes and How to Avoid Them

Mortgage Dubai

Mortgage rejected in Dubai. Is it common?

Without a doubt, more people are opting to own than rent a property in Dubai due to rising rents and attractive visa schemes introduced. Mortgage applications have skyrocketed, but banks reject mortgage all the time! It’s worth understanding common pitfalls and how you can prevent a loan rejection.

Top 5 Mortgage Mistakes in Dubai

1. Wrong Information on Your Loan Application

Banks in Dubai really do their homework on their potential clients. If your mortgage pre-approval has inaccurate information, they will find out. Make sure you provide accurate and clear information about yourself and your circumstances. When there are mistakes, like getting your income wrong, it makes you look unreliable, and that’s a red flag for the lender. 

2. Poor Credit Report

Your ability to pay back your loan is the most important thing a lender looks at. 

If you have poor credit score due to overdue payments for your utility bills or credit cards, lenders will worry about your ability to make your monthly mortgage payment, it can result in your application being rejected.

Note: If you have a poor credit history, get a copy of your credit report to see where the issues are. It’s worth getting advise from a mortgage broker on how you can improve, as they will know what type of score the lenders are specifically looking for.

3. You Weren’t Honest With Your Lender

Let’s face it, while it may be tempting to think that lenders don’t know everything about you financially, they really do their due diligence well. Be honest with your lender. Exaggerating or lying about your income or undisclosed debts on a mortgage application are considered fraudulent, and it’s not something you want on your record.

4. Debt-Burden Ratio Too High

A low debt-burden ratio (10%-30%) shows the banks you manage your debt well, have a higher chance to repay your debt, and pay your monthly mortgage payments.

For example: If your monthly income is AED 20,000, your total liability limit (i.e. credit card payments, car loan, mortgage, personal loan) should be 50% (maximum) of your income (AED 10,000). Anything higher than 50%, your mortgage will get rejected.

How much mortgage you qualify should be calculated by how much house you can afford. It’s important to find out how much you can borrow, as you don’t to end up with ‘too much’ house.

5. Weak Employer Profile

In Dubai, lenders will often opt to lend to those employed by companies with a strong reputation and a stable future. If your employer is relatively new, unstable, or has developed a bad reputation, it can very much affect your mortgage application outcome negatively.

Also, it’s more likely that you’ll receive financing from banks if you have been with the same company for quite some time. Remember, lenders want to see stability in you and your employer!

What if I am self-employed?

While self-employment offers many work-life advantages, lenders often view self-employment as unstable as income can be inconsistent, and has a stricter policy. It’s not an outright rejection, just be prepare to provide a stack of convincing documents for clarification to prove your past income and future ability to repay. Most lenders will want to see at least 2-3 years’ worth of documentations.

Plan Ahead

Keep in mind, most of the reasons for a mortgage rejection can easily be prevented, and even if you may get rejected by one bank, that doesn’t mean you will be declined by all.

So plan ahead. Get your finances into order 3-6 months before applying for your mortgage pre-approval. It’s worth reviewing your finances to know if you are in the right place to apply for an application. It will help prevent any setbacks, and most importantly, ensure you get the best mortgage deals out there.

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