How mortgage pre-approvals can accelerate home buying

It puts prospective buyers in a stronger position when it is time to close the deal

With a pre-approval in hand, offers on homes can be made more quickly, which makes a large difference in a very competitive market. Antonie Robertson / The National

The UAE’s real estate market has seen incredible growth over the past few years, with sales records being set every year.

The demand for homes has been across all segments of the market, from off-plan to secondary sales, and for budget properties to ultra-luxurious branded houses.

Home prices soared by 41 per cent in the first half of 2024, with sales once again set to beat previous years’ records, according to Bayut.

Contrary to popular opinion, the demand has not been due to cash buyers only.

Mortgages have seen growing demand, backed by competitive lending rates, low down payment requirements and a robust economy, which has ensured that defaults have been few and far apart.

In May 2024, mortgages hit a 14-month high, indicating the growing demand for home financing, according to Property Monitor.

However, getting a mortgage on time has been one of the primary reasons why property buyers often lose out on their dream home.

The typical buyer journey is such that they look for a house over a number of weeks across locations. After deciding on the home, they look to secure home financing, which can take a couple of weeks.

Home buyers who choose to do this independently have to individually approach banks for offers and manually put together all the documentation required.

But as this process goes on over a substantial period of time, the buyer discovers that the property they wanted to purchase has been sold to another customer, only because the mortgage process took too long.

That is why credible mortgage advisers recommend initiating the pre-approval process alongside the home search.

This puts prospective buyers in a stronger position when the time comes to close their property deal.

Pre-approval involves a thorough examination of a buyer's financial situation by a lender, including income, credit score, debt and assets.

This process results in a clear understanding of how much they can afford to borrow and, consequently, how much they can realistically purchase for.

For home buyers, securing their pre-approval has a number of benefits.

Visibility of financial standing

One of the primary benefits of getting a mortgage pre-approval is the financial clarity it provides. This helps buyers to focus on properties within their financial reach.

Pre-approval also eliminates surprises, by planning for various additional fees such as closing costs, government fees and home insurance.

Negotiation and competitive advantages

In a competitive real estate market like the UAE, buyers need every advantage they can get. Pre-approval equips them for that.

Real estate brokers and sellers also tend to prefer pre-approved buyers. A valid pre-approval letter from a bank signals to the seller that you are a committed buyer with the financial means to complete the purchase.

Pre-approved buyers are also in a stronger negotiating position with eager sellers and can have more flexibility on pricing and terms.

Speeds up the process

Obtaining a mortgage pre-approval can significantly speed up the home-buying process, especially with time being of the essence in real estate transactions.

Technology today has transformed how mortgages are processed, with some banks providing approval within 24 hours.

This is because paperwork has been reduced, if not completely eliminated, and the applicant’s information shared digitally.

Applicants can also make multiple mortgage applications across banks in one go. This is a complete overhaul to the traditional method of making separate applications at each bank.

With a pre-approval in hand, offers on homes can be made more quickly, which makes a large difference in a very competitive market.

Pre-approved buyers can fully focus on their home search than worry whether they will get a loan from a bank.

Finally, with much of the financial vetting already completed, the actual loan processing is a faster and smoother process.

Anoop Dhama is senior mortgage expert at Huspy