Sometimes applying for a mortgage can leave you disappointed and keep you from securing the home you’ve always wanted. Fortunately, we’re here to help you avoid these common mistakes and navigate through these challenges. But what exactly are these common mistakes, and how can you avoid them?
Employment Status
Mortgage lenders require more than just being employed to approve your application. They look for stable and reliable employment with strong longevity. It’s also important to note that some Islamic banks may reject applications if the applicant’s place of employment does not comply with Sharia law. In general, banks consider the size, history, and reputation of your employer when reviewing your mortgage application. If you’re unsure about your employment status and its impact on your mortgage application, consulting a mortgage advisor is recommended.
Poor Credit Score
Your credit score acts as an overview of your financial history and obligations to your lender. Your credit score provides information to banks on your financial capability in managing your mortgage payments. A low credit score will make it more difficult for you to secure a mortgage because it will make you appear unreliable to the lender. It’s important for you to increase your credit score prior to applying.
High DBR
It’s best to be certain of your finances before submitting a mortgage application. Your debt-to-burden ratio, or DBR, is a factor that banks use when determining your eligibility for a mortgage. Banks will calculate your DBR by deducting your monthly financial obligations, such as car loan or credit card payments, from 50% of your earnings. So if the DBR is more than 50%, banks can reject the application. One of the most important steps in getting your mortgage application accepted is to review your obligations before applying.
Mortgage Stress Test
Mortgage interest rates are likely to increase over time, for this reason banks will “stress test” your ability to repay your mortgage installments in order to ensure you can afford the higher rate for the duration of the loan. It will show the amount you will have to repay in the event that the interest rate increases noticeably.
It is crucial that you speak with a mortgage advisor to determine your eligibility and lower your chances of getting rejected. You can apply to multiple banks, have your whole application handled, receive professional guidance and special mortgage offers by working with a mortgage advisor. For additional information about your eligibility and to begin the process of becoming pre-approved today, get in touch with Elite Mortgage and Real Estate at sheeva@elitemortgages.ae
