How to Get a Mortgage for Buying your First Home?

Buying your first home is an exciting milestone in your life, but it can also be overwhelming. Understanding how mortgages work is highly important to navigating the home-buying process smoothly and successfully. This blog will cover everything you need as a first-time home buyer, from getting started to the best types of mortgages for buying your first home.

What is a first-time buyer mortgage?

A first-time home mortgage is a loan specifically designed for individuals buying their first home. Banks often offer incentives and deals to first-time buyers, such as lower deposit requirements, aiming to make it easier for people to own their first home and get on the property ladder.

How do first-time buyers get a mortgage in the UAE?

To get a mortgage in the UAE, you typically need to follow these steps:

1. Check your credit score: Before applying for a mortgage, make sure that your credit score is in good shape. A higher credit score can lead to better mortgage deals.
2. Save for a deposit: Lenders usually ask for a deposit of at least 15-20% of the property’s value in the UAE.
3. Get a mortgage pre-approval: A mortgage pre-approval tells you how much a lender is willing to lend you based on your financial situation. It helps you understand your budget and shows sellers that you are serious.
4. Find a property: Start house hunting according to the pre-approval.
5. Receive a mortgage final offer letter: You’ll receive a formal mortgage offer outlining the terms and conditions and monthly payments.

The 5 stages of mortgages

1. الموافقة المسبقة: Get a mortgage agreement in principle, giving you an idea of how much you can borrow. This involves an assessment of your financial situation.
2. Property search and offer: Find a property that fits your budget and preferences. Make an offer to the seller, which, if accepted, leads to the next stage.
3. Property valuation: Here the evaluation of the property is done and the market value of the property is determined.
4. Final offer letter: Here a final offer letter is issued where the monthly payments and other terms are outlined.
5. Property transfer: Once you accept the bank offer, the bank will prepare the required manager’s cheques and an appointment is set up for the property transfer.

How long does first-time home mortgage approval take?

The mortgage approval processing time can vary depending on several things, including the bank, your financial situation, and the complexity of your application. It can take between 2 and 4 days from submitting your application to receiving a mortgage offer on average. This time frame includes:

• Initial assessment: Reviewing your application and conducting a credit check.
• Underwriting: A detailed assessment of your financial situation and the property’s value.

Delays can happen if there are issues with your application, such as missing documents or discrepancies in your financial information.

What is the cost of a first-time homebuyer mortgage?

Deposit: The deposit is basically the upfront payment you make for the property. This deposit typically ranges from 15% to 20% of the property value for first-time buyers. A higher deposit can decrease your monthly payments and the total amount of interest you pay over the mortgage term.

Monthly Payments: Your monthly mortgage payments depend on several things, like the loan amount, interest rate and mortgage term. These monthly payments consist of both the principal (the loan amount) and the additional interest. Other costs, such as property insurance and life insurance, may also be included in your monthly payments.

Other Costs: 

• Valuation Fees: Charges for valuing the property.
• Processing Fees: The costs of processing your request range between 0% and 1%. 

What type of mortgage is best for first-time buyers?

The best two types of mortgages for first-time buyers are:

1. Fixed-rate mortgage: The interest rate remains the same for a set period, providing stability with unchanging monthly payments.
2. Variable-rate mortgage: The interest rate fluctuates based on market conditions, meaning your monthly payments can increase or decrease.

Calculating your mortgage rate in the UAE

Calculating a mortgage can be a complex and uncertain process, but we are here to help you with it.

PRYPCO’s mortgage calculator is designed to give you a clear picture of your options and interest rate  so you can make an informed decision. 

You can filter your search by interest rate, loan term, and other factors to find the best mortgage deals for your needs.

Takeaways

It’s crucial to understand how mortgages work in the UAE to navigate the home-buying process with confidence. By familiarising yourself with the types of mortgages available, the costs involved, and the stages of getting a mortgage, you can make informed decisions and find the best mortgage for your needs.