Securing a home loan can be a tedious process, and there are chances that even after qualifying for home loan eligibility criteria, your application might get rejected. You might be having a high-paying job, may have never defaulted on any loan, and may have been seeking a loan for a home built by a reputed builder and yet your home loan application might get rejected. There are several factors that lenders consider before approving your loan application. Below are some of the factors that might become the reason for a home loan application rejection
Age and Remaining Years of Service
Your age, basically the number of years left in your retirement, is one of the vital factors that lenders consider while approving your loan. Home loan come with an expanded period of time and therefore, someone who is nearing their retirement would not be a favourable home loan applicant, provided they have other stable sources of income.
Low Valuation of Property
The property that you are buying should be of higher value, or else there is a good chance of rejection of your loan application. Banks undertake their own property valuation by sending technical experts to visit the property site. The lender evaluates the property based on factors, such as the age of the building, condition and quality of construction, the location of the property, etc. The lender might downsize your loan amount or reject your home loan application if it finds that the property has a lower valuation than its actual worth of the market, as they have to maintain a loan-to value ratio.
Unapproved Property or Builder
The property you are buying should meet legal guidelines and must be approved by local civic bodies. A property constructed on disputed land or without adhering to certain guidelines will lead to the rejection of your home loan application. Moreover, lenders do not approve a loan on a property that will fetch lower resale value or is under legal dispute.
Frequent Job Change
An unstable job or frequent job switch between different cities would raise your lenders’ eyebrow and could be a reason for an unapproved home loan. Lenders look for stability in the repayment of the token money, hence a stable job looks more promising.
Low Credit Score
A poor credit score is an obvious reason for the rejection of a home loan application. A good credit score of over 700 (out of 900) is considered ideal for granting loan approval, any score below 700 will indicate to the lender that your credit repayment behaviour is risky. Lenders make sure to check your credit history through the credit report before approving your home loan application. Moreover, in the case of a joint application for a home loan, if your co-borrower’s credit score is low, your loan application can be rejected. The loan amount and EMI is generally decided based on the combined profile of all the applicants.
Incomplete Documentation
Many times, people forget to arrange all the required documentation, which might serve as a loan rejection criterion. Providing accurate documents and legal papers is an essential part of the home loan approval process. Also, providing wrong details and forged documents can lead to penalties or loan rejection.
Existing loans
Having an existing loan in your name could be a reason for your home loan application rejection. Lenders hesitate to approve a loan to someone who has been sloppy in the repayment of a previous loan. Poor credit history or having a previous loan with some penalty history will serve as a deterrent for loan approval.
Loan Guarantor to Defaulters
If you have been a guarantor of some previous loans, where the applicant defaulted on paying the loan terms, then you might fall under the defaulter list and are likely to not get approval for a home loan. Furthermore, if you are staying in a house that is on a lender defaulters’ list because of the previous tenant who defaulted on a loan or credit card payment, then your home loan application might be subjected to rejection.
Income Tax Returns
If you have failed to file your income taxes on a regular basis, then your chances for home loan approval are seemingly low. Even if you do not fall under taxable income, it is your responsibility to file your taxes on time. Failure to have done so and the absence of documentary support will lead to the rejection of your home loan application. Moreover, home loan tax benefit are reaped by those citizens who are disciplined in filing taxes.
A discrepancy in Signature and Profile
It is important to provide accurate information regarding your name, address, job profile, etc. and the details should match in all your documents. Any discrepancy regarding your profile details might lead to the non-approval of your home loan application. Also, your signature is vital and you should not be careless as it is scrutinised for security purposes.