Banglore;Purchasing a home is one of the biggest financial decisions we can make in our lives. The dream of becoming a home owner can be fulfilled with the help of a home loan.Even if your home loan application was knocked down, it doesn’t necessarily mean you’ll not get approved the next time you apply. But it’s important to find out why your application was rejected and improve on those aspects to increase your chances of approval.
Some of the top reasons for which your home loan can be rejected by a lender or a bank are given below.
1.Unpaid Dues:
When a borrower takes a home loan, one of the foremost things that are involved in the approval for the same are credit history and record. The credit history check basically involves determining timely payment of dues and EMIs of other loans, etc. The best way to clear this condition is to be punctual with payments and never miss deadlines on EMIs and credit card dues. You can always keep a check on your credit record by being aware of your bills and repayment dues
2. Missed or late credit payments
Before approving a home loan application, lenders check your credit history. In the credit report, they check whether the past loan payments or credit card bills were paid on time or not. How punctual you are with your credit payments reflects how responsibly you can handle credit in future. Therefore, it is necessary to never miss deadlines on credit payments.
3.Low loan to income ratio: This is another common home loan rejection reason. You have to inform your lender of the other loans taken, including your car loan, a two-wheeler loan, a personal loan and so on. This helps the lender evaluate your loan to income ratio. The total loans taken by you, including the home loan, if approved, should not exceed 50% of your monthly income. Lenders often reject home loans if the loan to income ratio exceeds half your monthly income.
4. Past defaults
In case you have been sloppy in the repayment of your previous loans, this would reflect in your credit history. The situation will be much worse, if there are multiple instances of repayment defaults. Since a poor repayment record will inspire little confidence in a lender, they may reject your application.
5.Unapproved property:
Lenders often verify if the property taken on loan is approved by local bodies. In case the property is unapproved, or if it fails to adhere to certain guidelines as prescribed by local authorities, the loan can be rejected. Furthermore, lenders are often hesitant to provide loans for purchasing older properties as they do not typically have good re-sale value.
6.Property’s age
Aside from your age, the age of the property also determines whether or not the bank will give you a loan. Even if the property is located in a seemingly premium location but is dilapidated and damaged, it would fail to get a financier.
7.Unstable employment
Applicants who frequently change their jobs are not considered reliable by lenders. Stable employment, on the other hand, is more ideal for lenders as it ensures timely loan repayments. To be eligible for a home loan, lenders prefer applicants to have employment history of at least one year in the current organisation.
8.Incomplete or incorrect documents
A home loan is sanctioned mainly on the basis of the documents you submit. If the documents required for home loan are incorrect or incomplete, the lender may reject your loan application. Therefore, it is important for applicants to furnish all documents when submitting the home loan application form.
9.Poor credit score
All of us are different and deal with money differently. However, any slip made along the way, will find a mention in your credit history, which is compiled by credit bureaus in India. As the first step while processing a loan application, the bank will access you CIBIL report from a credit bureau. In case of a low score – credit scores are assigned by credit bureaus to borrowers in India, based on the latter’s banking/payment history, on a scale of 300 to 900—the bank will reject your application.
10.Multiple loan rejections
When you apply for a loan, the lender enquirs for your credit history, which reflects in the and Credit bureau CIBIL also records incidents of loan application rejections. Such incidents become a part of an applicant’s credit record. Therefore, the applicant must check their credit score at one bank before they apply to another.
