Top Reasons for Home Loan Rejection

Finding a perfect home loan in UAE requires considerable in-depth research. Even then, the process afterwards isn’t straightforward. After receiving your home loan application, banks too conduct a detailed examination of your profile. There is always a probability that your mortgage application may be rejected due to any of the possible reasons. 

While home loan applications get rejected for various reasons, a few of them are frequently discovered in a large number of applications for a home loan in UAE. This article will discuss the major home loan rejection reasons in detail. 

Primary Reasons for Rejection of Loan Application in UAE

Go through the following mentioned points to find out the reasons for rejection of loan applications in UAE – 

Age

The foremost reason that results in the rejection of an application for a mortgage loan in UAE is the applicant’s age. The minimum age for applying for a home loan in any Emirate of the UAE is 21 years. The maximum age to apply for a home loan in UAE, on the other hand, ranges between 65-70 years. Most financial institutions set 65 years as the maximum age for ex-pats and 70 years for nationals. 

In case the applicant is younger than 21 years or above the maximum age limit (depending on whether they are a UAE national or an ex-pat), the home loan application can directly get rejected.

High Debt-to-Income Ratio

Possessing a high debt-to-income ratio indicates that a major portion of your salary goes towards debt repayments, which eventually reduces your chance of home loan application approval. The debt burden ratio primarily shows whether the individual is financially capable enough to pay off the monthly instalments with their existing. 

As per UAE laws, an individual’s monthly debt obligations must not cross 50% of their monthly income. However, any ratio above 30% can mostly lead to the rejection of your home loan application. 

Credit History and Credit Score

Having a bad credit score and credit history can highly impact your probability of getting a home loan application approved. A credit score is of the utmost importance when applying for a home loan in UAE, as it is one of the key factors considered to check the creditworthiness of the applicant. 

Home loans involve high amounts as well as long repayment tenures, which mean a higher loss for the bank in case of delays or loan defaults. For this reason, it can be challenging to get your application approved with a low credit score. So if your credit score is in the ‘low’ category (below 650), chances are that your home loan application can get rejected.  

You can check your credit score from Policybazaar.ae for free and find out if you qualify for a mortgage loan in UAE. For this, you can visit policybazaar.ae and go to the ‘credit score’ section. 

Down Valuation of Your Property

Irrespective of the market value of the property, financial institutions conduct their own property valuation before deciding on a particular home loan application. Numerous aspects influence their assessment such as the property’s location, quality of construction, present condition, and more. 

In case the institution that your property has a lower valuation than decided by the seller, your bank may reject your home loan application or ask you to renegotiate the price with the seller. 

Tips to Avoid Application Rejection for Mortgage Loan in UAE

Now that we are clear about the major reasons for rejection of loan application in UAE, let’s take a look at some effective measures you can take to improve the chances of your home loan application approval – 

Boost Your Credit Score

One of the key steps to avoid any rejection in the mortgage loan application is to improve your credit score or maintain it if it’s in the ‘high’ or ‘very high’ credit score category. The higher your credit score, the higher the chance of application approval. 

You can boost your credit score by paying off your debts, bills, and other monthly payments promptly. Moreover, you can also avoid using credit cards in excess and put a limit on the frequency of checking your credit score to improve it. 

Lower Your Debt-Burden Ratio

As mentioned earlier, banks strictly check your debt-to-income ratio to evaluate your borrowing risk. Thus, it becomes necessary to keep a lower debt-to-income ratio as it can indicate that you would be able to balance your budget in terms of debt repayment without any difficulty. While the requirements can vary for each bank, you can try to keep your debt-burden ratio in the 10-30% range to avoid facing any challenges in the approval.