10 Ways to Increase Your Mortgage Loan Approval Limit in the UAE
Securing a higher mortgage loan in the UAE can be challenging. However, with the right financial advice, you can increase your approval limit.
Lenders assess various ways to determine your borrowing capacity. Once you understand these methods you can better optimize your financial profile.
So, if you are looking to buy your first home, here are the 10 ways to increase your mortgage loan approval limit in the UAE.
Improve Your Credit Score
Your credit score determines your mortgage loan eligibility. Lenders in the UAE assess your creditworthiness based on your Al Etihad Credit Bureau (AECB) report.
- Pay off outstanding debts.
- Timely payments on credit cards and loans.
- Avoid applying for multiple loans or credit cards simultaneously.
- Monitor your credit report for errors.
Reduce Your Debt-to-Income Ratio (DTI)
Lenders evaluate your ability to repay a mortgage by analyzing your debt-to-income ratio. A lower DTI increases your chances of securing a higher loan limit.
- Pay off existing loans and credit card balances.
- Avoid taking on new debts before applying for a mortgage.
- Increase your income sources to balance your debt ratio.
Increase Your Down Payment
A higher down payment increases your mortgage approval chances. The UAE Central Bank mandates a minimum down payment.
- 20% for expatriates.
- 15% for UAE nationals.
Maintain Stable Employment Or Income
Lenders favor applicants with a stable income and employment history.
- Work with a reputable company.
- Maintain a steady job for at least six months to a year before applying.
- You should have a strong financial history.
- Provide audited financial statements.
Choose a Longer Loan Tenure
Extending your mortgage repayment term can lower your monthly installments. This makes it easier to qualify for a higher loan amount. However, while a longer tenure increases eligibility, it also leads to higher overall interest payments.
Apply With a Co-Borrower
Adding a co-borrower, such as a spouse or family member, increases your borrowing capacity. That’s because the lender will consider the combined income, leading to a higher loan approval limit. Lastly, your co-borrower should also have a strong credit score.
Maintain a Healthy Bank Account Balance
Your bank statements reflect your financial health. Lenders look at different things before approving the mortgage.
- Regular income deposits.
- Consistent savings.
- Responsible financial management.
Minimize Credit Utilization
Credit utilization refers to the amount of credit you use compared to your available limit. A high utilization ratio can negatively affect your mortgage loan approval application.
- Use less than 30% of your credit card limit.
- Pay off large credit card balances before applying.
- Avoid unnecessary expenditures.
Consider a Higher Earning Job or Additional Income Sources
Increasing your income can directly alter your mortgage eligibility.
- Seek a promotion or higher-paying job.
- Take on freelance work or side businesses.
- Invest in income-generating assets.
Work With a Professional Mortgage Advisor
A mortgage advisor can help you move around the complexities of the UAE’s lending market.
- Suggest the best banks with mortgage products.
- Negotiate favorable loan terms.
- Identify ways to strengthen your application.
FAQs
The DBR calculates the percentage of your income committed to monthly debt payments. In the UAE, it must not exceed 50% of your monthly gross income. Reducing existing debts can improve your DBR, potentially increasing your mortgage approval limit.
A higher credit score indicates financial responsibility and can lead to better loan terms, including a higher approval limit. In the UAE, a credit score of 650 or higher is typically required for mortgage approval.
The LTV ratio measures the loan amount relative to the property’s value. A lower LTV ratio, achieved by making a larger down payment, reduces the lender’s risk and can increase your approval limit.
Yes, securing a mortgage pre-approval demonstrates to sellers and real estate agents that you’re a serious buyer, potentially strengthening your position in negotiations and expediting the final loan approval process.
Higher interest rates increase monthly payments, which could lower your DBR and reduce the loan amount you’re eligible for. Conversely, lower rates decrease monthly payments, potentially allowing for a higher loan approval limit.
Extending your loan tenure can lower monthly payments, improving your DBR and potentially increasing your loan approval limit. However, this may result in higher total interest paid over the loan’s duration.
Lenders often prefer applicants with stable, long-term employment. Demonstrating job stability and a consistent income stream can positively influence your mortgage approval limit.
Conclusion
Increasing your mortgage loan approval limit in the UAE requires careful financial planning. By doing things like improving your credit score, you can alter your eligibility. So, always take proactive steps to secure the mortgage you need for your dream property in the UAE.
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