Home loans are very popular in the UAE. There is a good portion of the population which opt for buying the house by using the loans. In terms of loan amount and keeping in mind the fees, terms and conditions it is suggested that you compare the different plans and providers and make the best decision.
Mortgages and home loans are difficult to understand and there are some basic things that you should know whether you are UAE national or not. Understanding these things will help you to know the financial market. There are different requirements for getting a home loan and these are nationality, credit score, monthly income and other factors.
Mortgage Loan eligibility criteria in the UAE
There are various types of banks and financial institutions which operate in the UAE and these users have various types of home loans with different features, interest rates and other requirements.
The requirements will be different for each provider but the general mortgage loan eligibility criteria in the UAE will be similar and it is as follows.
- The loan applicant should be a national/resident or expat
- Individuals who are applying for the loan should be minimum of 21 yrs old and the max limit is 65 to 70 yrs
- Expats should have a minimum monthly income of AED 15,000.
- UAE nationals should have a minimum monthly income of AED 10,000
In the UAE, mortgages are available to nonresidents and the options available are very less as there are only a few institutions that offer loans to non-residents.
Self-employed individuals can also apply for home loans in the UAE. The loan providers want them to complete two years in their business.
What factors affect home loan eligibility in the UAE?
When you are looking for mortgage loans it can feel more exciting to decide where to begin, what to look out for and what lender and mortgage to choose. Home buyers are at a disadvantage due to their experience and inexperience. They may feel difficult but to avoid any confusion you can consider the mortgage loan eligibility criteria.
- Credit Score
- Employment status
- Long term
- Debt to Income ratio
Terms of the Loan and home loan eligibility have an inverse relationship. As a typical rule, the younger you are the less the risk and the lesser the premium. You can smoothly navigate through the loan approval process. Minimum age requirement is 21 years for the majority of the banks. The limit is usually 65 years for expats and 70 years for UAE nationals.
2. Credit score
Among all the key factors Credit score is a very important criteria for home loans in the UAE. Credit score is a three digits number which is between 300 and 900 which will show the financial record of the borrower. The loans, dues and other factors are checked to find out if the borrower has the capacity to pay off the loan or not. The loan providing institutions will hesitate to provide loans if the borrower does not have a good credit score. If the poor credit score borrower gets a loan then they will have to pay higher interest compared to others. Borrowers with high credit scores will have to pay lesser interest. Maintaining a good credit score is a great task and home loan eligibility will be easy having a good credit score.
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3. Employment status
Every lending institution will have a different set of criteria for issuing a loan. The requirements are different from servicer to the servicer. If a salaried individual applies for a higher loan amount then it is expected that monthly salary requirements are higher for the person. A high concern is whether the borrower will pay back the loan or not. Self employed borrowers are likely to have higher risk, which is why there are different parameters for self-employed borrowers. The key factors are financial stability, income stability and repayment capacity. If the borrower is willing and capable of repaying the loan or not.
4. Long term
When you are choosing for a long term loan repayment plan you are choosing less strict eligibility requirements. The monthly repayment amount will be lesser and the interest rate will be higher. You are allocating a lesser portion of your income towards the loan repayment. The total interest amount that you will be paying out will be pretty much higher.
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5. Debt to income ratio
This will indicate the debt to income ratio which means the amount of debt you owe compared to the income. The lenders will use this ratio for estimating the individual repayment capacity. This can be done by dividing the current monthly debt from the average income and multiply with the ratio by 100. All kinds of debts should be considered for this purpose like student loans, personal loans, credit cards and other debts. This ratio should be maintained under 50 percent to avail further debt.
What documents are required for this loan?
The following are the documents required for home loan eligibility in the UAE
- Payslips and bank statements for the previous 3 or 6 months
- Passport, Visa, and Emirates ID copy
- Salary certificate
- Recent credit card statements
- Copy of Dubai Electricity & Water Authority (DEWA) bill or lease agreement confirming your current address
If you are planning to reduce your monthly debt then choose a long term loan plan schedule. It is important to remember that you will be paying more money for the interest. With lower monthly payments, you can keep the Debt to Income ratio in check while also making it easier for you to repay the loan. Keep payments on time and be punctual with your payments. Make all your additional income sources available to repay your debts and have a smooth loan closing process.