Investment in buying a property is the most significant investment a person could ever make in his entire life. It is a financial as well as an emotional investment. Home loans make the process of you creating your dream house a reality. You can reach your lender, get the loan on a lump sum and repay in the form of an Equal monthly instalment (EMI).
You have to undergo a screening process before the bank accepts your loan application. Since the investments are of significant amounts, lenders ensure that you would be able to pay back the loan amount with the interest rate. Therefore, it’s advisable to go through the standard eligibility criteria and the respective bank’s internal policies before applying for a home loan. To make this process a bit easier for you, we present some of the most common reasons your Home loan Application might get rejected.
Employment uncertainty: If the lender finds your employment status questionable at the time of applying, he might not approve the application. Frequent job switches or working on a contractual basis or self-employed are some reasons for home loan rejection.
It is crucial that if you are planning to take a home loan to finance your dream house, make sure to stay in a stable job for at least three years or more. It presents a picture of stable employment in the eyes of the lender.
Unpaid past dues: Before approving the loan application, lenders check your past credit history to assess your credibility. If you have past outstanding dues with the lender or late dues, this affects your credit records with the lender and presents a negative image in front of the lender. Ensure to pay all the EMI on time to avoid any case of late payment. You have to have a good credit score to be eligible to buy a home loan. Credit scores vary between 300 to 900, and a credit score above 750 is ideal.
Inadequate property valuation: As a home loan is a secured loan, the market value is the most critical screening process as the lender lends the amount based on the property’s valuation. The valuation of your property is determined by factors such as the location of your property, its accessibility with the market and quality of construction. It would be best to take this as an essential criterion to construct the property at a place connected to the market.
An unapproved builder or unapproved property: Before approving the loan, lenders check all the documents to ensure that the builder is approved by the bank and is well-reputed. Another reason for application rejection could be the unapproved property. If the said property is not approved by the lender or does not follow specific guidelines set by the local bodies, the loan may get rejected. You must check with the lender the list of builders approved by it.
Incomplete documentation: The lender checks if no documents are incomplete and all the documents are correctly filled. If any provided information is found to be inaccurate, your loan application stands rejected.
High level of debt burden: If the borrower is already in debt and the total debt decreases the real income, the lender may consider unapproving the loan. A high loan burden reduces the borrower’s real income and makes the repayment capacity inadequate.
Make sure to borrow only if you need it and avoid unnecessary debt burden. A low debt burden increases the chances of approval to a great extent.
Conclusion: there are various lessons that you learned throughout the blog. For Home loan eligibility, make sure to maintain a good credit score, check if all your documents are correct and carry a low debt on income ratio.