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When banks say ‘No’ to real estate finance buyers in Dubai?

Posted September 13, 2012 by Julie Robert to Finance 1 0
This post was written by a EasyFinance.com Community member. The views expressed below may not reflect the views of EasyFinance.com.

This is no secret that Dubai mortgage market is providing a lot of facilities to property buyers in Dubai. From flexible payment options to multiple mortgage products, lower mortgage rates to 100% real estate financing, every activity of Dubai mortgage market is tailored for helping property buyers to make the most of lower property rates in Dubai. This is the very reason why real estate finances are tempting buyers and banks are reporting significant increase in number of their mortgage deals.

Tamweel, the biggest Islamic lender in the UAE, has reported a 30% increase in its mortgage deals during H1 compared to the same period last year. It also reported a 26% increase in mortgage applications received during the first half of 2012. Despite that the banks in Dubai have become quite lenient in their lending criteria, they are still cautious about real estate finances in Dubai.

Even today when a good number of buyers are interested to secure mortgage deals in Dubai, banks never hesitate to say a blunt ‘No’ to mortgage buyers. Even the buyers having plenty of cash and good credit score sometimes don’t qualify for real estate finance. This is because banks don’t want to repeat the mistake of the past which led even the strongest banks in Dubai to stop trading mortgage shares. Buyers, in order to qualify successfully for a home loan, must know that the following three problems are generally leading Dubai banks to say a clear ‘No’ to them.

Reason # 1:

Many buyers, when their mortgage applications have almost been approved, don’t hesitate to make other large credit purchases. Such large impulse purchases, if are made even just a few minutes before the closing of a mortgage deal, lead the banks to reject their applications. Several Dubai banks make a secret second credit cheque at the last moment to figure out the exact financial situation of the buyer. Any large credit purchases made after applying for a mortgage leads the banks to say no to buyers, since these purchases enhance the credit risk of banks.

Reason # 2:

The buyer who is not stable with his career or job should better not apply for real estate finance, since banks in Dubai are never ready to lend a helping hand to them. Yes! Banks are always cruel and they don’t have money for someone who is inconsistent and likes to switch jobs fairly often. If the buyer is frequently found to be on the hunt for new jobs, banks in Dubai will say no to them. The stable employment record is the key to assure the banks about your sound financial position.

Reason # 3:

Though real estate finances in Dubai have become cheap but closing costs are still the same. Many prospective buyers underestimate these costs charged by banks and only take into consideration the amount of loan. Banks say a clear no to those who can’t afford the closing costs of real estate loan. So buyers must make sure that they have the reasonable amount in hand, covering the down payment as well as closing fees and costs of up to 12%-14% of the mortgage loan, before applying for a home loan in Dubai.

Though there are many other reasons such as errors in the mortgage application, insufficient down payment and poor credit record which also lead the banks to reject real estate finance applications but these three reasons are the most significant in this regard. Taking care of the aforementioned problems can help the buyers to close their mortgage deals successfully.

About Julie Robert: This post has been written by Julie Robert from Bayut.com, she has wide knowledge of Dubai real estate, Dubai Properties and Dubai Rentals.  

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