Of course, everyone wants their mortgage application to be immediately successful, but sadly that’s not always the case. A mortgage is a significant investment for the lender and they want to be sure that their money is going to someone they can trust to pay it back.
When it comes to reasons for rejected mortgage applications, there are some specific issues that occur all-too regularly. Many of these can be avoided if thought about in advance and addressed; here at Mortgage Finder, we aim to help you do exactly that.
Often referred to as your debt-to-burden ratio, or DBR, your affordability report is a measure by the bank to see that you can meet your monthly mortgage repayments. It’s not enough that you believe your income is sufficient for you to manage it, they need to see that it’s strong enough to keep your mortgage paid even in difficult circumstances.
The different banks have their own way to calculate affordability, but the core process is to take 50% of your salary and then deduct your monthly financial commitments. If you have nothing left, then you are likely to fail the test – your debt ratio is simply too high.
Fixing the problem of affordability
Prior to applying for your mortgage it’s worth reviewing your liabilities to ensure the approval process is smooth. Once half your salary easily covers your regular liabilities, you know you are in the right place to consider the application.
The stress test
Interest rates will fluctuate over your mortgage term and your fixed rate won’t last forever. Mortgage lenders want to know that you can handle the mortgage payments even if the interest rate increased. To check this, they will perform a stress test on your mortgage repayments, this considers what the repayments might be if the interest is higher than it is today.
Like the main affordability test, the stress test is measured against your current finances. It’s set at different levels for different banks but can be substantially higher than your actual rate.
Overcoming the stress test
As each lender has their own criteria for the stress test, a little inside understanding goes a long way. Speak to our experts here at Mortgage Finder and we can help narrow your choices down to those lenders that most suit your personal finances.
You can read more about mortgage stress tests here.
The error of misrepresentation
Truth is an important factor in your mortgage application; if you are found to be unclear or dishonest about your circumstances, it can cause issues. Make sure that you disclose your circumstances clearly and honestly. Mistakes like suggesting you are a company employee when really you are a self-employed individual who owns the company, for example, can be costly.
The banks will do their due diligence and research you, so disclose all key information in a correct and clear fashion.
Speak to us at Mortgage Finder if there is anything you feel unsure about disclosing to the lender, or any problems you are worried about. We can help you with expert advice or suggest a lender that is more understanding of your situation. Above all, be genuine and honest with all of your details.
Your credit history
In many countries around the world, your credit score has a big impact on your mortgage application. In Dubai and the UAE, your credit score also forms an important part of your application and is a key factor taken into consideration. If you have a poor financial history and a substantially low credit score, then this may adversely affect your application.
Sorting your credit score
Time is the key factor in improving a credit score. Have patience and put as many months between you and the last default or mistake as possible to show improvement. Remember that credit histories are not moved from one country to another, so your UAE score may not line up exactly to that of your home country. Also, a blank score that indicates no activity in the country at all can often be as off-putting for a lender as a negative one – after all, it means they have no idea if you’re a responsible borrower or not.
Speak to our team here at Mortgage Finder if you are worried about your credit history.
You can also check out this article for more information on credit scoring and your mortgage, click here.
Age and nationality
How old you are and where you come from are both factors you cannot change, but it’s important to realise that both can affect your application.
In terms of age, you must be at least 21 to apply for a mortgage in the UAE. There is also an upper age limit set by most banks, in most cases your final payment will be due before your 65th birthday if you are an expat employee, and by the time you are 70 if you are a UAE national or a self-employed individual.
Where you come from is also a factor. There are some countries that are sanctioned and the UAE banks are unlikely to lend to nationals from these countries except in exceptional circumstances. The list of sanctioned countries is subject to change and is not the same for all banks.
Options for age and nationality-affected applicants
It is not always a complete ‘no’ as exceptions can be made in some cases, and alternatives found in others. At Mortgage Finder we can discuss your options and use our extensive knowledge to find the right lender for you. Give us a call if you are concerned.
If the bank values the property you want to purchase for less than you have offered to pay, there could be a discrepancy in the mortgage available that can make the final transaction difficult. This can lead to an increase in your down payment or the sudden need to renegotiate price with the seller.
Resolving the situation after a down-valuation
There are still options available to you. Read this comprehensive article, here, for more advice, or give us a call at Mortgage Finder and speak with one of our specialist advisors.
Business and company issues
Your employment is of key importance to lenders in the UAE and many things regarding your employer or your business, if you own a company, can affect your application. The following points are some areas that the bank might take into account when looking at your employer or business:
- Company reputation, including any negative media or bad press;
- Established history of the company;
- Company size and projected stability;
- Financial standing;
- Industry in which the company operates.
Banks are most comfortable lending when they know the company you are connected to is stable and has a strong future.
Solving employment issues
If you are in a position to affect your company (as the owner, for example) then you may want to consider making improvements, like having clear financials, before applying for a mortgage. If you are an employee and your company is in poor standing, then you may wish to look at alternative work options – of course, remember that stable employment and the length of time you have been at a company are also factors that will be taken into account.
Before making any drastic changes, it is worth speaking to a Mortgage Finder expert if you have any questions regarding how your employer or company might impact your application.
A range of options with Mortgage Finder
It’s important to always remember that even if you may be rejected by one bank, that doesn’t mean you will be declined by all. At Mortgage Finder we will work with you to select a mortgage lender that is the best fit from the entire market.
Contact us today with our simple form, or pick up the phone and give one of our mortgage advisors a call.