It is said that both clubs have reached an agreement and Mohammed will continue his career in Dawu.
He is expected to undergo a mandatory medical examination at Dreams. The deal could be done in the coming days.
Dreams made contact with Mohammed after Kotoko made it clear that he wasn't in their plans for the upcoming season.
Mohammed is on a tall list of players Kotoko have placed on transfer.
The 24-year-old joined Kotoko from Ashgold in 2019 and his contract will expire in December this year.
Habib played 22 league matches for Kotoko last season as they finished second behind Hearts of Oak in the title race.