Home Loan Rejected! Know Why?

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. While you cannot demand answers or explanations from them, you should definitely be aware of situations where your application is rejected.

1. Low Credit Score

A credit score is a measure of an individual’s creditworthiness. If your credit score is low, banks and NBFCs will shy away from offering you a loan or offer you a loan at a substantially higher interest rate, or against collateral, or ask you to give a financial guarantor. There are many reasons why your credit score is low. The biggest reason is that you may have a poor repayment history wherein you may have delayed EMIs, substantial credit card dues, or have defaulted, or have not settled a previous loan.

Another reason could be that there may be errors in your credit report leading to a low score. Whatever be the reason, you must keep track of your credit score by getting your free annual reports from various credit rating bureaus such as Experian and CIBIL. If there are factual inaccuracies, you can easily get them corrected with the credit bureau.

Also Read: Actions that impact your Credit Score

2. Property type and Condition

Loan Applicants are generally under the impression that banks and NBFCs do not sanction home loans for buying properties especially old buildings, which is not true. However, if the life of the property, as evaluated by the value measurer appointed by the bank, is only a few years or if the physical condition of the property is poor, the lender would not be willing to take the risk of granting the home loan.

3. Documentation Issues

A home loan is sanctioned on the basis of the documents you provide. If the key documents required for a home loan are incomplete or not in order, the lender is constrained while appraising your home loan application objectively.

4. Age and Repayment Capability

All Banks, NBFcs, and lenders have an age eligibility criteria which you must be met. Typically, the lenders need you to be in the 18-65 age brackets. If you are nearing retirement, the chances of rejection are higher, as you will be left with insufficient time to repay your home loan. However, you may be provided with a loan with a much shorter tenure that overlaps your working life. Apart from age restrictions, the lender also looks into the employment status of the applicant to check if the borrower has a stable income source.

5. Employability Issues

• Employer Profile: Nature of employment and the credibility of the employer is also a factor that lenders consider before lending.
• Job Stability: Frequent job hoppers are considered to be a riskier profile as opposed to those who are stable in their employment
• Income: Every lender has set a minimum income criterion, which is often decided by geography. If you fail to meet the minimum income limit set by the lender, chances are that you are staring at a rejection.

6. Eligibility Issues

Eligibility issues arise when you already have multiple loans either on the property or other personal loans and the lender looks into the leftover money against your salary or income after removing the existing repayment amount and have the right to move forward with your application or reject at their sole discretion.

Fundmytra is a loan service provider who helps you in availing loans from multiple lending partners for all your financial needsin the form of Personal Loan, Credit Card, Business Loan, Trader Loan, Home Loan and Loan Against Property.