Most of us need the help of a home loan when we decide to make a real estate investment, considering the average cost of residential properties today. Even if our savings are enough to fund such an expensive purchase, making a lump sum payment can be difficult for most. A home loan helps tremendously in such scenarios, as it means a large loan amount that can allow you to buy the property you want without finance being a constraint.
Home loans are now easily accessible to borrowers, given the growing demand and the willingness of lenders to offer competitive offers. However, most lenders expect potential borrowers to meet a set of eligibility criteria that are the bare minimum and submit supporting documents in order to receive the home loan amount they want.
Ensuring that you meet the basic eligibility criteria is crucial for home loan approval and disbursement. However, few borrowers are aware of the eligibility criteria and the fact that missing even one could result in a home loan being rejected. Rejection of your loan application will not only delay your home buying plans, but will also negatively impact your credit profile and your CIBIL score. In this article, we list all the potential reasons why borrowers may face a home loan denial to help them avoid such a situation.
Common Reasons for Rejection of a Home Loan
Here are some common reasons applicants may face rejection of their home loan application. Before applying for a home loan, it would be useful for you to make sure that you avoid all of this.
1. Insufficient repayment capacity
The amount of home loan you are looking for should match your ability to repay; which means you should be able to sustain EMI payments without difficulty. Lenders take this factor seriously because sanctioning a large sum to someone who might not be able to repay it on time increases the risk of default.
2. Other outstanding debts
If you already have a high number of outstanding debts, you may not qualify for a home loan. Lenders may be hesitant to approve your loan application because your repayment power is already at full capacity with other EMI payments, leaving little or no room for a new EMI obligation.
3. Low credit score
Lenders closely review applicants’ credit profiles and CIBIL scores before approving their applications. The credit profile and credit score sum up everything the lender would want to know about their repayment habits and financial discipline, allowing them to have a realistic measure of the applicant’s debt behavior. If your credit score is below 725, it may be difficult for you to get the home loan you want.
4. Uncertain income and employment
Your income and employment status are of the utmost importance to the lender as this is directly related to your ability to pay EMIs on time. If you are not employed in a stable company or if you have too many job changes in a short time, this may not bode well for your mortgage application, as it does not establish any reliability of a source of income.
5. Property Value Assessment
If the property of your choice does not meet the lender’s property assessment criteria, you may not receive a loan sanction for the same property. The property-related factors that are checked are the age of the property, its market value, the profile of the developer or possible legal problems.
Now that you have a clearer idea of the factors that could cause your home loan application to be rejected, you are in a better position to apply for a home loan. If you are still unable to adequately meet the lender’s home loan eligibility criteria, consider applying for a joint home loan with a co-applicant to increase your chances of approval. You can also use a mortgage calculator tool to assess your mortgage eligibility before you apply to take corrective action and improve your profile.
(Note: this article was written by Brand Desk)