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A mortgage application rejection can be disheartening for anybody, but it’s certainly not the end of the world. All you need to do is focus closely on the reasons for rejection, and you can avoid such situations in the future.
Here are some of the most common reasons for a mortgage rejection in the UAE. We have also discussed some easy preventive measures to avoid rejection. So, let’s get into it.
1) Poor Credit Score
Banks in UAE check your credit score before approving any loan, and if the credit score is too low, your mortgage application may get rejected. You can check your credit score for a small fee via the official app of Al Etihad Credit Bureau (AECB)- the government-owned credit rating firm of UAE.
If your credit score is poor, it is better to apply for a mortgage only after improving your score. Even though it takes some time, it will greatly smoothen the mortgage processing later. Paying loan payments on time, timely payment of credit card bills, or taking a personal loan to create some activity can improve your credit score depending on why your score is low.
2) Mortgage Affordability
Next on the list is Mortgage Affordability. Affordability is the bank’s evaluation of whether you can afford to pay the mortgage payments. Different banks may calculate your mortgage affordability differently, but the general method is that banks consider 50% of your monthly and then deduct all your credit liabilities from that 50%. The remaining part of your income is your mortgage affordability. If the affordability rating is sufficient for the mortgage, the bank will consider your application, and if not, your application can get rejected.
To avoid rejection due to affordability issues, you can calculate your affordability before applying for a mortgage and apply for a mortgage amount that is within your affordability range.
3) Stress Rate
The stress rate is a test rate that lenders will implement on you to check whether you can handle an unexpected increase in interest rates in the future. The stress rate is usually between 3.5% to 8%. However, different banks may have slightly varying policies, and an application can get rejected if you fail to pass this stress test.
To avoid such a scenario, contact a reliable mortgage advisor, as their experts are well-familiar with different bank policies regarding stress tests. Therefore, they can help you with precise suggestions related to your affordability and stress tests.
4) Eligibility Criteria
To apply for a mortgage in the UAE, you have to meet certain eligibility criteria like age and nationality set by the government. The minimum age to apply for a mortgage in UAE is 21, and your loan term must end before you are 65 if you are an ex-pat or 70 if you are a UAE national or a self-employed individual. Your nationality also matters when it comes to mortgage approvals.
The best option is to avoid direct bank contact and process your application via a mortgage advisor. Reliable mortgage advisors make sure that you are eligible for a mortgage before processing your application with banks. So there is no chance of such a rejection when you are with a reputed mortgage advisor.
5) Misrepresentation Issues
Honesty is the most crucial factor while describing your circumstances to the bank. If your statements and documents in any way seem dishonest to the bank, the bank will immediately reject your application. So, keep things simple and clear in your mortgage application.
6) Down-Value
If the bank down-values the property you applied for, there can be some issues with your application. The bank may either reject your application or ask you to renegotiate the price with the seller. To avoid such situations, try to purchase the property from reputed property developers and sellers who have a standardized pricing system for their products.
7) Employer Issues
The history and conduct of your employer or your business may also impact your mortgage application. If your company or business is unstable, or if it has developed a bad reputation due to some mishandling in the past, it can negatively impact your mortgage approval. So, make sure that you are connected with a stable well-reputed firm before you apply for a mortgage.
Conclusion
As you can see, most of the common reasons for mortgage application rejection are easily preventable if you go via a reliable mortgage advisor. And when it comes to reliability, Payless4Mortage is an undisputed leader in the UAE. There are several services and wide range solutions for all types of borrower profiles.
So, no matter what your mortgage requirement is, contact Payless4Mortgage, and enjoy a smooth mortgage loan processing like never before.
We aim to eliminate the financial barriers between people and speed up their progress by developing a highly productive network for lenders and borrowers.
Get in Touch Today :