Things that you must do before you buy a house so you don't end up with any surprises.
Find out what you can afford
It is important to take into account your earning potential as well as long-term financial commitments to figure out how much you can actually afford to spend on your first home. While you may automatically be restricted to getting a mortgage worth 75 per cent of the property value if you're buying a ready property in the UAE, it is in your best interest to zero in on a property that you're comfortable paying for, without overwhelming your finances. And remember, you also have to account for bank fees, broker fees, government fees as well as the regular cost of home maintenance.
Fund your down payment
If you intend to buy a house on mortgage, you have to start gathering the funds for your down payment well in advance. As an expat, you will have to put down at least 25 per cent of the property value as down payment towards the purchase. If you still haven't saved up enough, consider starting a savings plan to systematically set aside a portion of your income to finance your first home. Follow a budget to maximise your savings and cut down on unnecessary overheads. If your plan to purchase property is still some time away, you can also invest your savings in bank deposits, bonds or stocks to boost their value.
Get rid of existing debt
If you are still enduring the aftermath of credit card debt, student loans or other personal loans, you must work towards paying these off as soon as possible. Any high-interest debt you owe is only going to make it more difficult for you to qualify for a mortgage. Existing debt installments will increase your debt burden ratio (DBR) and banks won't offer you home finance if your DBR exceeds 50 per cent, i.e., if more than half of your monthly income goes towards repaying debt.
Get your mortgage pre-approval in place
If you're serious about buying a home, you must secure a mortgage pre-approval. If you don't have one, real estate brokers may be reluctant to show you properties. To get pre-approval, banks will require you to submit the documents verifying your eligibility for home finance, like salary statements, letter from your employer, and copies of your passport, visa and Emirates ID. It is also important to do your research around interest rates and bank fees before you pick a bank.
Reorganise your budget
A huge chunk of your savings will go towards the down payment, but that isn't all. You will also have to account for the impact of regular mortgage installments on your existing budget. Therefore, you will have to set a new budget that will work for your newfound status as a homeowner. You will also have to allocate a percentage of your income towards new expenses like higher utility bills and maintenance costs. And you may even have to save up more in case you plan on pre-paying a little extra towards the mortgage every year.
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