Getting a Home Loan Pre Approval A Comprehensive Guide

Presenting a number of opportunities for investors and entrepreneurs, Dubai can rightly be termed as a city where dreams come true. Whether your dream is to own a waterfront property at a lavish location in Dubai Marina or a luxury villa, it can be realized in this beautiful city, also known as the city of gold.

However, when it comes to buying a residential property in Dubai, one should take numerous factors into account. And among them, arranging finances is certainly the most important. The complete process of searching for a property in the emirate depends on this factor only. Other factors, including the facilities available, family requirements, also matter a lot, but not as much as the budget or funds.

This is why it is recommended to get a home loan pre-approval if you’re taking the financing route. Once you have gotten it, you can start your hunt for properties in Dubai, as you will have the maximum budget limit for the amount you can borrow. After you have selected the property, you can contact the lender/bank, and they will release the funds after the necessary investigation.

Here’s all that you need to know about home loan pre-approval in Dubai:

Reasons You Should Get Home Loan Pre-Approval

• It will define the upper budget limit. Thus, you will be able to look for listings in areas that have properties within your budget range.
• You can also decide the property type after getting pre-approval since you will have a clear idea about the budget you have.
• With the pre-approval, the entire process will be streamlined. You will not have to worry about facing difficulties while getting funds from the bank/lender at the last minute.
• When reserving a property in Dubai, the buyer has to pay 10% of the total cost. It is a non-refundable amount that is deposited at the time of signing the sales agreement. In case the buyer fails to pay the remaining amount, later on, their initial payment will not be returned. This won’t be a problem if you have gotten a home loan pre-approval.

Things to Know Before Getting Home Loan Pre-Approval

Bank vs Mortgage Broker The Better Option
Property seekers in Dubai have two options at their disposal when it comes to financing their homes. They can either apply for a loan from a bank or a mortgage broker. Both these options come with certain perks and disadvantages. You must weigh their pros and cons thoroughly before making a final call. However, it is to be noted that private lenders tend to be more flexible. Therefore, in some cases, they can make for a better option. But only deal with licensed and certified brokers.

Up-Front Costs
Bear in mind that you will have to pay up-front costs at the time of booking your property. This usually includes DLD fees, down payment, and the real estate agent’s commission.

Shedding light on the down payment depends on the total value of the property and whether you are an ex-pat or a local. For ex-pats, the law states that they have to pay at least 25% of the total cost if it falls below AED 5 million. The DLD transfer fee is 5%, whereas they will also have to bear a 0.25% mortgage registration. The latter is calculated on the total amount lent by the lender.

Make sure to take all these expenses into account before buying a property in Dubai and applying for a loan mortgage.

Eligibility Criteria
Needless to say, you will only get pre-approval if you meet the eligibility criteria. This criterion varies with each lender. As stated above, banks are strict in this regard. They do not give pre-approval to an individual who does not meet the criteria. Furthermore, they also check the credit score and history at the time of approving the applicant.

Pre-Approval and Final Approval Fees
The applicant is required to pay a minimum of AED 1,000 as a pre-approval fee. Other than that, they may also be required to deposit the final approval fee. It is usually 1% of the total amount borrowed by the applicant.

The validity of a Pre-Approval
A pre-approval comes with a certain expiry date. It usually varies from lender to lender. However, usually, the buyer has two months’ time to find a property.

Suitable for Off-Plan Investment
A pre-approval can prove to be a suitable choice if you are making an off-plan investment since such projects do not require the buyer to make a huge amount of initial deposit. They have to pay for the price of the property in installments. This allows them to buy a home in a luxury resident project like Stella Maris Tower rather easily.