Top 10 Reasons for Home Loan Rejection
Home loan is a long-term commitment which demands a stable repaying capacity by the lenders. The tenure on the home loan is generally up to 30 years which is also a long-term relationship with the bank. Hence, the lenders usually check through various factors before approving the loan.
If you had already faced a home loan rejection or planning to apply for a home loan, read through this article to get some insights on the reasons for home loan rejections.
1. Career Stability
As the home loan is a long-term responsibility, a stable career becomes an important criterion for approval. If you had switched jobs frequently, your loan application is very likely to get rejected. Banks expect the applicants to remain with the current employer at least for 3 years.
2. Low Income
Every bank has set an income limit for the individuals based on the geographic locations. The income requirement is usually high for people living in metro cities. If you do not fall into the minimum income limit, your home loan application may be denied.
3. Property Approval
Lenders do not give loan against the property which is not approved by the local bodies or agencies. In some cases, the property may not adhere to the relevant guidelines prescribed by the local authorities. Banks are also hesitant to give loan to an old property as it will not have a good re-sale value.
4. Builder Approval
Sometimes, you might have an approved property but not a builder approved by the bank. In such a scenario, the lenders may reject your loan application. Hence it is very important to check before applying for the loan if the builder is approved by the banks.
5. Age of the Borrower
As the home loan tenure is mostly up to 30 years, the lenders expect your age to be 60 to 70 at the time of maturity. Hence borrowers who do not fit this parameter may face a loan rejection.
In such instances, you can bring in your spouse, children and sibling as co-borrower to become eligible for the home loan.
6. Loan to Income Ratio
If you are already laden with too many loans, the lenders would assess your loan to income ratio. Your loan amount including the future home loan should not cross 50% of your income. If your loan to income ratio goes above the half of your income, the lenders might not approve your loan, considering you are over burdened with debt.
In such cases, you can include your spouse or children’s income to become eligible for a home loan.
7. Credit Score
Most often, a poor credit score may be an important reason for your home loan rejection. Lenders assess your creditworthiness with your credit score. A bad score is a result of defaulting payments on your current loans and credit card bills. This could be an indicator to the lender that you may not repay your future home loan.
Sometimes, the negative credit score may be due to incorrect information provided by the lender to the bureaus. Hence it is important get your credit report and fix the issue as early as possible to become eligible for a home loan.
It is important to furnish all the relevant proofs and documents while submitting your home loan application. Any false information on your application or documents could damage your approval rate. Similarly, all your signature on the application form should match the signature on the proofs that you submit.
9. Being a Guarantor for Other Loans
If you have been a guarantor for the loans taken by your friends or relatives, you are equally responsible for the repayment. Hence banks consider it as your own loan and assess your creditworthiness including that loan.
If the loan that was guaranteed by you is a huge amount, this could probably affect your home loan eligibility.
10. No Dues Certificate from Previous Lenders
You must get a ‘No Dues Certificate’ from the lenders for the loans you have already closed. If you have not obtained one, banks might reject your home loan application.
Getting a home loan is a long process and you
need to carefully evaluate your application before submission. Instead of
hastily applying for a home loan, keep a check list, prepare them all, become
eligible and get a home of your own successfully.