Home Loan Application Rejection

Taking a home loan is one of the most crucial steps in building or buying a new home. Home Loan application involves a lot of research, decision making and required documents. It becomes important to know the home loan application rejection reasons. It makes you prepared with all the ammunition.

You need to be prepared to save time and effort. There are times when you are unaware of the many formalities and paper work. It is important to know the reasons for rejection of your home loan application.

When you apply for a home loan, the bank has every right to accept or reject the same. In case your loan is rejected, your bank may or may not tell you the exact reason.

You should definitely be aware of situations where your application could be rejected.

Some of them are listed below.

 

Credit score

 

More often than not, a low credit score is the prime reason for your home loan getting rejected. Even one missed credit card payment or payment mismatch can be the reason for rejection.

High credit score plays a significant role in getting your home loan approved. You should ensure you have a good credit score when you apply for a loan. Your credit score is recorded by CIBIL (Credit Reports and Risk Management Solutions).

 

Builder not approved

This is one of the most common but unexpected reasons for the rejection of a home loan application. Not all banks give loans against the property of builders. It is, thus, critical to understand from the builders which banks have approved them.

 

Builder approved but property not approved

This is another unexpected reason for a home loan rejection. A builder may figure in a bank’s list of approved builders. But a specific project launched by him may not.

It’s important to check that the builder and the entire project has the bank approval.

 

Regular flow of income, nature of income and filing of income tax returns

If the flow of income is volatile and unpredictable, the lender may not consider your home loan.

If the income is from sources like tuition, cooking and catering, etc., the lender may not be confident about the genuineness of the income.

If the income is substantiated by investments, such as shares, mutual funds or bank fixed deposits, the same may be considered by the lender.

The lender may also reject your home loan application, if the salary is received in cash. And it is not substantiated with provident fund deductions and TDS deductions.

If you have filed your income tax returns for more than one year at a time or within a short time frame, the lender may view it with suspicion. It may presume that the returns have been filed for the purpose of availing home loan. Unless there are advance tax payments or tax deductions at source, which prove the genuineness of the income.

 

Job Stability

Changing too many jobs also reflects poorly on the home loan application. Banks consider job stability as one of the main criteria for approving a loan for buying a home. Banks insist that the borrower should be employed in a particular firm for at least 3 years. If the applicant’s company, seems unstable, the bank reserves its right to reject the loan.

 

Age while Application

Home loan applications are rejected if the borrower’s age is close to the retirement age. The lender is hesitant to offer loans to such borrowers as it assesses your repayment capacity to be poor or zero, after a few years.

However, some banks may be willing to offer short-term home loans. Short term loans for big amounts would lead to a really high EMI, taking away the comfort of availing a home loan in the first place. Therefore, borrower’s age plays a very important role in terms of home loan rejections.

Existing loans

When you are already debt-ridden with previous loans, the bank has the right to reject your loan. It shows that your liabilities being higher than your income. The bank has the right to think that your leftover income (after honouring all existing commitments) wouldn’t be enough to meet the EMI for the home loan.

 

No NOC on a Previous Loan

 

It is imperative that you get a NOC (No Objection Certificate) on any previously closed loan. Banks or lenders reject your home loan application, if you do not provide with an NOC of your old loan that has been closed.

The list is vast and it is no joke to get your home loan sanctioned. Therefore, you must be very sure that your records are clear. Sometimes providing additional security can help you secure the home loan you are looking for. It can be in the form of fixed deposits, collateral securities, a guarantor or insurance policies.

Hence, it is important to check all areas and take into consideration the banks viewpoint. Above points can help you ensure your loan is accepted and can begin living your dream.

 

Happy Living!