If you are looking to become a homeowner for the first time, you may not know where to begin. If you talk to your homeowner friends, they will give you great advice on how to navigate the murky waters of home buying, and most of them will tell you to “get your financing in order”, ASAP. Especially, if you intend to purchase a home using a mortgage it is of utmost importance to sort out your funding.

The cornerstone of a mortgage-backed home purchase is a mortgage pre-approval from a lending bank.  If you have a property finalized or just started looking you can get the ball rolling on your mortgage pre-approval and start the process. In this FCMB KnowledgeHub post, we will break down the benefits of getting pre-approved, to show how you can save time, save money, and avoid unnecessary headaches.

What is a mortgage pre-approval

A mortgage provider, i.e. a bank, will collect documented financial information to assess the creditworthiness of a mortgage applicant. If the applicant is creditworthy, the applicant will be pre-approved for a mortgage loan for a specific loan amount. The loan amount can either be requested for maximum eligibility or be based on the property being purchased. A pre-approval only indicates a strong likeliness of the bank to approve the applicant’s mortgage application. Pre-approvals can be obtained without any processing fees from most lenders, however, in recent times we have seen a few lenders charging for pre-approvals, and are generally valid for 30-90days. The pre-approval will clearly state the remaining requirements to be fulfilled to issue the Final Offer Letter (FOL) to complete the mortgage loan.

Benefits of getting pre-approved

Now that you have a basic understanding of getting pre-approved let’s see the upsides of pre-approvals.

1.  Helps you figure out the down payment and associated fees

With pre-approval information, FCMB can help you figure out associated fees such as title transfer fees, home insurance, etc. This will allow you to avoid unnecessary headaches of falling short on your down payment at the time of closing.

 2.  Save time on searching for out-of-budget properties 

With a pre-approval, mortgage applicants’ can leave out the guesswork on figuring the total budget, and can hone in on the right property within a specified budget. You can eliminate the countless hours browsing through listings that you simply can’t afford. In some cases, we have seen clients being approved for higher loan values than expected allowing them to go for higher-valued properties.

3.  Using pre-approvals to restructure personal finances  

With a pre-approval, a mortgage applicant receives a great wealth of eligibility information. Using this information as an applicant, you can restructure your personal finances to get a better deal. You will be able to

• take advantage of “mortgage associated fee financing”
• consolidate secured/unsecured loans
• restructure your debts and incomes to cut down on interest costs
• push your budget higher to upgrade to better properties.

4.  It is almost a done deal with sellers that require proof of funding

 Some sellers require proof of funding to sign an MOU. Pre-approvals are accepted by all sellers, so when you have the pre-approval in hand it’s almost a done deal.  

5.  More bargaining power and less haggling

A pre-approval in hand sends a key message to sellers which indicates you are a serious buyer. Our industry experience has shown that sellers are more open to negotiating and closing deals faster when there is a pre-approval on the table. You can save a lot of time by avoiding back-and-forth negotiations and struggling to close the deal. Furthermore, since the budgets are set sellers tend to haggle less on price.  

6.  It’s a smooth sail to your new home

 All property sales are well documented in the UAE because all banks are required by the Central Bank of UAE to document all mortgage-related activities, therefore, you will be required to submit an array of documents. When you start the pre-approval process early you will have a minimal amount of paperwork to submit at the time of purchase of a property. I.e. you do not need to overcomplicate your busy life by struggling to produce required documents at the last moment.

7.  Benefits of a pre-approval outweigh the costs 

Some banks offer zero-cost pre-approvals, check with us if you qualify for one. However, if you were to pay the costs of a pre-approval you can offset that with future savings when you finalize your mortgage deal. The applicant will need to submit the required documents and FCMB will take care of the rest. After all the documents are submitted you can learn within 3-5 business days if you are eligible for a loan and the exact amount you can borrow. Pre-approvals are valid for 30-90 days and once a pre-approval expires a revalidation fee will be charged to renew the pre-approval.   

Pre-approval charges vary from AED 500-2700 depending on the bank, however, some banks issue pre-approvals at no cost or waives the fees during times of promotions. Check with us on your requirement and we will be able to share the related pre-approval cost details.

Starting the home buying journey by getting pre-approved you are clearing the shortest path to make your dream home a reality.

FCMB pre-approval services are based on industry experience and we will help you

• submit the right documents at the right time
• minimize supplementary document submissions
• assist in locating/producing/translating valid documentation
• understand the ins and outs of the mortgage and pre-approval process  
• restructure your finances to get better deals and possibly higher budgets
• figure out associated fees
• sort fee financing
• guide you every step of the way.

To cap off a pre-approval can be like a magic wand that conjures the best mortgage deal for you, and it remains the key tool in the home buying mortgage kit. Coupled with FCMB’s pre-approval services we will help you save time, save money, avoid unnecessary headaches and get you situated in your dream home in no time. With FCMB you are home.

About the Author

This blog post was authored by FCMB Team & Zamran Zaharan.