Reasons for Home Loan Mortgage Loan Rejection in UAE

Whoever is applying for a home loan in UAE wants their application to be approved instantly but mortgage loans in UAE do not get sanctioned so easily. For the lenders and banks in UAE, a mortgage is a very important investment and that is why they want to make sure their money will remain secured.

Moreover, by already knowing the reasons why mortgage applications get rejected you will be able to improve your chances of easily receiving a home loan in UAE. With proper preparation, you will also be able to save both your time and effort.

Why Do Home Loan Applications Get Rejected in the UAE?

There are multiple reasons why lots of home loan applications get rejected in UAE, some of these reasons are discussed below:

1. Delayed credit payments

Whenever you apply for a home loan in UAE the creditors or lenders evaluate your credit history. While looking at the credit report they check if the credit card bills and previous loan payments have been reimbursed properly on time. 

The level of your punctuality with your credit card and loan payments in your credit report showcases your credit handling ability. That is why you should not miss the deadlines for credit card payments and loan repayments in UAE.

2. The fallacy in your credit report

Although you have a perfect credit history, the bank or creditors can reject your application for a mortgage loan in UAE due to a flaw in your report. That is why it is important for everyone to thoroughly check their credit reports before they proceed with the home loan application.

You can request your credit report for free from our website or you can also check it from the al etihad credit bureau (AECB) by paying a fee. If you find an error while checking your report you can certainly contact AECB and request for correction.

3. The age of the applicant

Most creditors or lenders in UAE reject the home loan application of people who are very close to their retirement age. After retirement, the individual’s capacity to repay the home loan in UAE will be very limited.

4. Employment instability

Lenders of creditors do not rely on the lenders who randomly change their jobs. They prefer providing home loans to individuals who have stable employment because it will ensure that the creditors will receive their payment on time. Banks and lenders issuing mortgage loans in UAE go for the applicants that have at least one year of employment history in the present company.

5. Delay in the payments of guaranteed loans

If you have acted as a guarantor for your family and friends then it will also affect your credit history. Although you are very punctual about your credit payments, the individual who has taken the loan may not be regular enough while repaying the loan, all of this will also be reflected in your credit report.

Moreover, if the borrowing individual defaults during the repayment process, the credit will ask the guarantor to repay the loan. That is why it is recommended to act as a guarantor when you are confident enough about the borrower.

6. Substandard employer profile

Even though your income is good enough, the profile of your employer can directly or indirectly affect the application process for a home loan in UAE. If you are an employee of a well-reputed company or MNC then your chances of approval will increase significantly.

7. Property issues

A home loan in UAE is considered a secured loan. This is because, for availing them, borrowers must pledge their individually-owned property to lenders as collateral. However, lenders do not usually accept all kinds of residential properties, rather, they prefer properties having a better resale value. 

Another preference of lenders for security is that the individual property of borrowers must be situated in a valuable location. Before naming a property as collateral, you must ensure that it has a clear title and that you have all necessary documents related to it.

8. Unverified Builder

Before applying for a home loan in UAE, you must verify the builder. Several times, lenders do not approve loans because the builder of your property is not reputed or trusted enough. It won’t be a good idea to picture what happens if a mortgage application gets rejected. Therefore, be careful when you go looking for a property and search for builders that are verified, real estate developers or builders. 

9. Frequent loan rejections

Whenever you apply for a mortgage loan in UAE, the lenders conduct your background check to assess your credit history. This is reflected in the AECB, which also tracks instances of your Home loan application rejections in the UAE. 

This can often become one of the reasons why mortgage applications get rejected. Hence, the applicant must necessarily check their credit Score. It also ensures the applicant a higher chance of getting their loan approved the next time.

10. Unapproved Property

Sometimes, particular phases of a construction project do not receive the bank’s approval. This happens usually when the builder has been verified but the property is not. The particular property might be a disputed one or it must not have got a NOC from the concerned authority, etc. This is another one of the big reasons why mortgage applications get rejected. 

So, to avoid such circumstances, conduct a thorough check on the real estate developer or builder, details of the construction project and the required bank approvals for various stages of property development.

Home Loan Eligibility in UAE

11. Incomplete documentation

Even after taking all recommended precautions, people get worried about what happens if mortgage application gets rejected. The best way to ensure your home loan in UAE is sanctioned without hassles is by furnishing complete and correct documentation during the application process. If the necessary documents are incomplete or have insufficient information, the lenders can reject your home loan.

12. Doubtful Repayment capacity

Doubtful or low repayment capacity of applicants is also one of the significant reasons why mortgage applications get rejected. The lenders generally evaluate your loan amount to your income ratio for determining how comfortably you will be able to repay the loan instalments. If you are already incurring multiple credit payments, your loan repayment capacity becomes irresolute.

This decreases your chances of approval for a home loan in the UAE. Hence, make sure your loan amount including your future home loans shouldn’t exceed 50% of your current income. In case your loan amount to income ratio is greater than half of your income, the lenders might reject your application given that you are financially overburdened.

What to Do After A Mortgage Application Gets Rejected?

There can be many reasons why mortgage applications get rejected.

Here are some steps that can help you increase your chances of approval for a home loan in the UAE:

1. Payment of outstanding dues

While desperately applying for home loans, we often ignore our credit history which is rife with high defaults. Not paying your dues timely reflects a careless credit score and it can greatly affect your home loan approval.

To increase your chances of home loan approval, clear off all your outstanding dues as soon as possible. Doing this can significantly reduce your debt-to-income ratio, showing a better loan repayment capacity.

2. Improvement of the credit score

A poor credit score shows negative handling of past credit history. This can lead to the rejection of mortgage loans in the UAE from multiple banks. Therefore, maintain a good credit score by adhering to terms and conditions, incurring lower interest rates, and other ways that are listed below:

• Do not delay in paying your credit card bills
• Maintain your credit utilization ratio to a below 30% mark
• Make sure you are paying your loan instalments on time
• If you do not need them, never apply for new credits unnecessarily
• Never initiate closure of your unused credit card accounts
• Keep checking your credit report from AECB for the avoidance of potential errors

3. Appeal for a joint home loan

If you think that your income is not sufficient enough to apply for a mortgage loan in UAE then you should consider applying for the loan with another earning applicant or your earning spouse. If you jointly apply for a home loan your eligibility will increase. In this scenario, the creditor will look at the income and credit score of both applicants while assessing their applications.