UNDERSTANDING PROPERTY RESERVATION GAPS WHEN IT COMES TO MORTGAGE PRE-APPROVAL

A lot of property investors believe that getting a mortgage pre-approval guarantees them a property deal. But in reality, this is a huge misunderstanding when buying a property in Dubai.

A pre-approval is secured when the bank decides that a certain individual is eligible to lend a certain mortgage amount. But this doesn’t allow the individual to buy property straight away.

What actually happens

A pre-approval carries certain conditions. There are several steps still needed to be done to purchase a chosen property. Let's understand this gap that most of the investors do not expect.

1. Property reservation needs faster confirmation 

Units that are ideal, especially when it comes to well-priced villas & family-homes, are often reserved at a very fast pace. Bank operations that qualify, and for the borrower to receive the official letter takes a longer time to compete with other investors in the market.

2. Seller deadlines are strict

In a competitive market, the sellers expect a deposit that is around 10% with a signed Memorandum-of-Understanding (MOU) document as soon as possible. If a buyer cannot provide the requested deposit and documents, the seller is not compelled to hold the offer until the buyer gets things in order.

3. Valuation risk

Even with the pre-approval secured, the bank valuation might place the mortgage amount lower than the property if offered at. The investor should then cover the rest of the amount by cash or lose the agreed deal.

4. Changing bank conditions

The Banks might change the required conditions to give-out mortgage loans. Interest rates and other changed criteria of eligibility can delay or even unqualify buyers from the final approval.

When buyers face issues like this, they might lose a deal even after paying a booking fee, getting into unfavorable agreements to navigate and more.

How this affects the market

• Sellers might try to avoid mortgage buyers

• Agents handle mortgaging processes and other contingencies rather than the property negotiation

• Buyers limit their spending capacity to avoid unnecessary delays

How buyers can reduce this risk

• Work with expert mortgaging service providers who will guide you clearly

• Having extra cash to fill in unexpected gaps in the deal

• Taking the time span of these auxiliary tasks before offering to buy a property
  

Understanding the market as well as how things operate in every single market is important when investing in real estate. This is the reason why an expert property consultant is required in property investment. They will not only guide you to close the deal, they will evaluate your mortgage and refer to expert service providers to get your requirements processed in due time.