Many people consider buying a home is one of their goals in life, but the high prices of apartments and real estate in general is often an obstacle to achieving that goal. As a result, many then consider bank financing to buy a house, especially if they intend to do so in stable markets such as Europe and the Gulf.
In this article we will explain the most common steps often taken by banks to finance real estate in most of the Arab countries, to make it easier for those who are considering re-locating there or to buy a house especially in the UAE which is one of the most in-demand countries in the region when it comes to owning real estate.
Paperwork
Banks require a number of key documents to provide financing for properties. These required documents vary from one bank to another, but in in most cases you will need the following:
• Proof of employment - which is a letter addressed to the bank from the human resources department of the company you work for, indicating the date of hiring, your position, your net salary, and an acknowledgment that you still work for them to that date (consider checking the accepted form with the bank).
• Salary slips - for the last six months. The time period may vary from one bank to another.
• Salary transfer – in order to mortgage real estate, most banks require that your salary be fully transferred to them. This could be done by requesting an official written letter from the company you work for, which must be stamped and signed with a bank-validated signature.
• Social security statement - which can be obtained from the concerned authority to prove the length of time you have been employed with the company.
• A price quote from the property owner shall be sent to the bank, indicating information about the property, accompanied by all the relevant legal documents, such as:
- The size of the property and its associated facilities. o Address and number of the land plot on which the property is located with all relevant details, according to the local Land Department.
- Any blueprints issued by the government departments proving the ownership of the property (such as property registration or similar documents, building permit or structural scheme).
• A preview from a company or a third party authorized by the bank with an estimated price of the property you intend to buy.
Steps To Take Out A Mortgage
• Open a new account with the bank to which you want to apply.
• Transfer your salary to the new account using an official letter from the company you work for.
• Consult a bank to find out your funding limits based on your monthly income.
• Find the right property for you that fits your financial abilities to pay the installments.
• Fill in the application form, and attach all the required documents mentioned above.
• Wait for the approval from the relevant department of the bank.
• Get the contract signed by all three parties: you, the bank and the property owner.
Mortgaging A Property Via Islamic Banks
In many countries people consider mortgaging via Islamic banks to avoid paying non-Islamic interest requested from traditional banks. The required paperwork and steps are similar to what we have mentioned above, but the Islamic contracts are different from the regular ones. There are two types of Islamic contracts:
• Leasing contracts: In which the bank is the actual owner of the property, while the buyer acts as a lessee. At the end of the agreed period, the bank waives the property to the buyer after receiving all agreed installments.
• Murabaha contracts: In this type of Islamic contract, the buyer is the actual owner of the property, and it is often requested from the buyer to mortgage the property to the bank until receiving all agreed installments.
Financing a new home is always a little challenging and confusing, and you want to make sure you're protected legally and financially. But if you keep the information above in mind then your home financing process will go much smoother!
I hope you enjoyed this article about how to finance a new home and take control of your real estate investing.
Interested in more articles about real estate and frugal finance?
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