Taking a home loan is one of the most crucial steps of building or buying a new house. It involves a lot of research, documentation and decision making and if you are not fully prepared, then your loan application might get rejected. Banks also follow stringent application process to assess the repayment capacity of borrowers, which often leads to rejection of the home loan application. Hence, it is important to be aware of the reasons that might impact the approval of the same.
We have listed a few reasons for which your home loan can be rejected:
- Low credit score: One of the major reasons for your home loan getting rejected is a poor credit score. A low credit score implies that you have a history of defaulting on loans or credit card bills repayments. Thus, always make sure to pay your EMIs and credit card dues on time to have a good credit score. Take out your credit reports at regular intervals and in case of any error, report it to the bureaus or lenders for rectifications.
- Job stability: Job stability is an important aspect that lenders check before approving the home loan. Changing too many jobs may have an adverse effect on your future credit approvals. Lenders consider shorter employment durations as a sign of an unstable career and consider such borrowers as less creditworthy. As per the bank’s requirements, you should be employed in a particular organization for at least three years to apply for a home loan.
- The stature of your company: If your company is a start-up or has been financially unstable, then chances of home loan rejection are high. Lenders generally ask for financial reports of your organization to identify the profit margins of your company and decide whether to approve or reject your loan application. A self-employed person should be in business for a minimum of 5 years and the business should be profitable at that time.
- Age: Home loans are rejected if your age is close to the retirement age. Try to rope in your spouse or employed children to increase the chances of your loan approval. Some banks may be willing to offer short-term loans, however, the interest rates on such loans are high. Most lenders have an upper cap of 60 years on the age of home loan applicants.
- Property-related issues: Lenders do not accept all types of properties as securities for home loans. If your property has a lower resale value, there is a chance that your loan might not get approved. Also, ensure that your residential property has been approved by local agencies and is not involved in any sort of dispute. Any issue with the layout or title of the property could also result in the rejection of your home loan application.
- Lack of proper documents: If you submit incomplete documents or provide any false information to the banks, your home loan application will not be processed further.
- Mismatched signature: It is an important factor to consider while applying for a home loan. Your signature on the home loan application should match the documents that you have attached with the same.
Conclusion: So before applying for a home loan, make sure you keep all the above-mentioned factors in mind. Keep all your documents in order and check your credit history and income for hassle free approval of loans.