Why Your Home Loan Can Get Rejected
New loan applicants are often unaware of the complications and formalities need to be fulfilled while filling a loan application as several papers and. It is very difficult to get all the details right the first time..
Main reasons due to which your loan application could get rejected:
1. Residential address on the defaulters’ list ?
Be careful while purchasing or renting a home. If you live in a home where someone who has not paid loan or credit card dues, all banks will have the address stored in their defaulters’ database and also in cibil database. In this case, there is a high probability of your application being rejected.
2. Pay all your dues:
Late EMI payments, huge pending debts and credit card dues; all can also be a major reason for loan rejection for most cases. The only way to overcome it is to pay up all dues. Make sure that CIBIL updated their data before you apply for a new loankeep a check on your bills and credit repayments . To avoid any problems,
3. Do you have other debts?
If you are taken a loan and you are paying it regularly then too it will make it difficult for you to repay new loan if your income vs debt ratio is high, then your loan will be rejected. If you are already having too many debts, then your income minus the ongoing Emi’s will be considered as your net income.
4. Are you loan guarantor to a defaulter?
When you sign the dotted line to be someone’s loan guarantor, , do not rush to sign for them because if they fail to repay, you will be responsible to repay the loan on their behalf. you should make sure that the applicant has the ability to repay the loan. Unless you have strong reasons to believe so
5. Age Factor?
Banks are likely to reject home loan applications in this case. If you are nearing retirement age, then banks would not provide u loans as you will not have repayment capacity after a few years. A few bank can be ready to offer you loan for short term up to the date of retirement. But, Short term loans for huge amounts would increase up the EMI, making it a heavy to pay the Emi.
6. Job hopping?
Banks place a lot of importance on job stability. You may not realize it, but being a frequent job hopper can reflect poorly on your loan application. In some cases where a reputed company’s future appears unstable, the bank can reserve its right to provide loan to an applicant from that company Certain banks even insist that an applicant must be employed with a particular organization for three years or more to be eligible for a home loan.. Thus job stability is an important factor considered by banks while giving loans.
7. Has your loan application been rejected before?
Whenever your loan application gets disapproved, it is recorded in your CIBIL credit score. So don’t keep on applying for loan from one bank to another.
8. Does the property you are purchasing satisfy policy guidelines?
Generally, banks prefer properties that are are in demand, easy to sell, have stable prices and simple to value,. So while choosing your property keep in mind that it is not very old and falls in line with bank guidelines. Not all types of residential properties are suitable securities for home loan.
If there is a problem with the title, layout etc., your loan application could get rejected. So choose an established and trusted builder who has all the necessary documents for easy sanction of your loan
9. Low Credit Score?
Credit score is a significant deciding factor in sanctioning home loan. Make sure you have a good credit score in place before applying for the loan.
Here are a few tips on how to achieve a good credit score:
- Late repayments will show on your credit file. Even the smallest glitch can affect your chances of getting a home loan.
- Use your credit card very carefully.
- Pay your credit card dues in full and on time.
- If you want to avail a substantial loan, clear all your existing dues and then apply for it.
10. Do you file your income tax regularly?
It is very important to have a clear track record of tax returns for the past two years before applying for a home loan. You must file your income tax returns , irrespective of whether you get Form 16 from your employer or not. Now that we know what can go wrong while filing a loan application,
Few more tips on how to prepare before applying for a home loan:
- Each bank has its own policies when it comes to evaluating a loan application. Make sure you have complete details of your existing investments (equity and mutual fund portfolios, FD, PPF and EPF statements), any existing property details or additional proof of your pre-payment ability
- Get a copy of your credit report from CIBIL and other bureaus and figure out if there are any concerns in it, which need to be addressed. For example, if you have paid all your credit card dues but its not reflected in your CIBIL record, approach your bank and get proof for the repayment. Then submit it to CIBIL for updating the information.
- Calculate your net worth to evaluate if you are ready for a loan commitment.
- Ensure you have back up funds to pay your EMI for a couple of months.
- Make as much down-payment as possible and prepare well in advance to close the loan.