Taking a home loan requires a long-term financial commitment from the borrower, apart from a stable repayment capacity. In most cases, a home loan’s tenure ranges from 25 to 30 years, making it a long-term financial relationship with the lending establishment.
Therefore, lenders normally look for multiple factors, including detailed home loan application documents, prior to approving any home loan.
If you’re contemplating applying for a home loan sometime soon, or have already faced rejection, please go through the points provided below to get some insights on different reasons behind home loan rejections.
Every bank and NBFC specifies a certain income limit for the potential borrower, depending upon the latter’s geographic locations. As expected, the income requirement is comparatively higher for people residing in metropolitan cities. There is a high likelihood of your home loan application getting rejected if you fail to meet this criterion.
With home loan being a long term financial responsibility, lenders look for a stable career in borrowers before approving any application. If you are someone who switches jobs frequently, don’t be surprised if your application is turned down. Banks and NBFCs expected home loan seekers to have been with their current employer for a minimum time period of three years.
As the tenure of a home loan goes up to 30 years, lenders expect the borrowers to be between 60 and 70 years in age by the end of the loan’s tenure.
Therefore, people who don’t fit into this parameter might face rejection. If you expect your loan application to get turned down, for this reason, you can always bring in a co-applicant such as a sibling, children, and/or spouse to improve your eligibility.
The lenders are always hesitant in extending home loans for a property that hasn’t been approved by the local agencies and/or bodies. It could be that the property wasn’t constructed adhering to the guidelines laid out by these organizations, thereby resulting in poor resale value.
Approval of the Builder
Often times, the property you’re seeking home loan for might be approved, but the builder might not be approved by the lending establishment/s. If so, the corresponding lenders will have every reason to reject your loan. Hence, make sure that the builder hasn’t been banned by the potential lender, before submitting your home loan application.
Poor Credit Score
Counted amongst the most common reasons for rejection of home loan applications, poor credit score gives lenders a negative impression about your repayment ability. Credit score serves as a very important means for assessing anyone’s creditworthiness.
Defaulting on loan EMIs and/or credit card bills are two commonly known reasons behind a poor credit score. Sometimes, a below par credit score can also be because of incorrect information supplied by lenders to the credit bureaus.
Hence, you must keep checking your credit report from time to time, and fix any such issues in time, before applying for a home loan.
Lack of Home Loan Application Documents
Whenever you apply for a home loan, it’s very important to back the information provided therein with sufficient home loan application documents. The presence of any false documents or information can significantly reduce your chances of loan approval. Please note, your signature on the home loan application should match with the signatures present on the documents submitted by you.
High Loan to Income Ratio
Another factor that lenders look at before approving a home loan application is the loan to income ratio. In essence, your total debt (including the home loan under consideration) shouldn’t cross 50% of your total income.
There is a high likelihood that your application might get rejected if your loan to income ratio is higher than 50%. Last but not the least, whenever you apply for a home loan, make sure you do it after comparing the offers extended by multiple lenders. GoSahi.com is a well-known and reputed website where this can be done with great ease.