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Guide to first-time buyer mortgages

Buying a property is probably the biggest investment you’ll ever make.

It’s understandable if you feel a bit daunted at the prospect. But it’s a process every homeowner has gone through and there are tips and guidance available to help you.

Here are some things to know for first-time home buyers. 

First-time home buyer guide

The UAE has a vibrant property market, so you’ll have plenty of options. Start by analysing your lifestyle and asking yourself some important questions, such as:

  • Do you want to live in an apartment, townhouse, or villa?
  • How big/how many bedrooms?
  • Which area would you like to live in?
  • What amenities, such as parking or outside space, are important?
  • Do you need to be near your workplace, schools, shops, or transport?
  • Do you prefer a brand-new building, or an older one?
  • If you’re an expat, can you buy in the area you want to live in?

This should help you focus your search, before you ask the next, crucial, question: what's your price range?

What can you afford?

You may have a picture of your ideal home, but reality kicks in when you look closely at the finances.

If you’re a cash buyer, there are still expenses to budget for. And if, like most first-time buyers, you need to apply for a mortgage, a few factors will dictate how much you can borrow:

  • Income
    You’ll need a salary certificate or evidence to prove you can pay back the mortgage
  • Down payment
    UAE nationals typically need at least 20% of the property value, while expats need at least 25%
  • Credit score
    A good credit record can mean easier approval and a better interest rate

It helps to apply for an Approval in Principle before starting your property search in earnest. This is a quick and easy way to get an idea of how much you can borrow and can prove to agents and sellers that you’re serious about buying. 

Doing comprehensive research into the local property market and current prices can also help while searching for a home and negotiating an offer. 

You can also try our home loan calculator to work out what your repayments will be.

How do first-time buyer mortgages work?

Once you’ve found your ideal property and put in an offer, you can move to the next step: exploring mortgage options and applying for a mortgage.

There are different types of mortgages to choose from, including a fixed-rate mortgage, variable-rate mortgage, or green home loan. There are also non-resident home loan options available. 

Find out more about mortgage options in the UAE.

Buying a home for the first time may mean you can apply for a mortgage at a higher loan-to-value (LTV) ratio than for second property purchases. LTV ratio is the loan amount expressed as a percentage of the property’s value. So if you’re eligible for an 80% LTV mortgage, it means you’ll only need to pay 20% of the property value as a deposit.

First-time home buyer tips and guidance

Finding a property and applying for a mortgage are just some of the multiple steps in the first-time home-buying process. Here are some other factors to bear in mind.

  1. Credit check
    Part of the process is a full credit bureau check with the Al Etihad Credit Bureau (AECB) and a valuation of the property
  2. Rules for expats
    If you’re not a UAE national, there may be restrictions on where you can buy. Find out more
  3. Rates and fees
    See what you could be paying for your mortgage here
  4. Jargon
    There may be lots of terms and concepts that you don’t understand, so ask questions and do your research before committing to anything
  5. Legal work
    A real estate agent or lawyer can help you sign a Memorandum of Understanding (MOU) with the seller, as well as apply for a No Objection Certificate (NOC) and handle all the documents
  6. Extra costs
    Try to keep some money aside to cover legal and other fees, as well as a deposit and other expenses when you move into the property

Takeaway

Few of us are taught how to buy a house for the first time, but with some careful planning and following guidance, the process doesn’t have to feel intimidating.

There may be a bit of admin involved, but the feeling of taking possession of your first home is likely to overshadow any hiccups along the way.

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What next?

Explore more

Choosing whether to buy or rent your home is a difficult decision, but our guide can help you decide which could be the better option for you.
Learn about how to buy a property and how the process works with our guide.
Everything you need to know about the different types of home loans.

Disclaimer

This article provides general information about mortgages. HSBC UAE may not offer all the products or options mentioned. This article should not be relied upon as financial advice.