Home Loan Problems Faced By Applicants - Home Loan Blog - Tata Capital

Common Problems faced by Home Loan Applicants

Mar 08, 2017

People have a lot of misinformation and wrong perceptions about home loans. This is the reason they face problems when they apply for home loans.

Here we discuss some common home loan problems faced by people who had applied for home loans in past. Knowing these will help future home loan seekers be better prepared when applying for the same:

Poor Credit Score

The lender will first of all check the credit score of the applicant even before the actual application is processed. Many buyers have poor repayment track record and that reflects in poor credit score. So if your credit score is not good, then there is no point applying for the loan as it will be rejected outright. It's better to wait for some time and improve your score by being regular in your repayments.

Processing Fee

The lenders charge a fixed amount (around 0.25% to 1%) as processing fees of loan application. In most cases, this amount is non-refundable and the amount is lost if the application is rejected. Since home loans already involve lacs of rupees, even a small percentage can mean a huge amount. So always make an honest assessment whether your loan will be approved or not by checking you credit score, current loan obligations, downpayment, etc.

Problems bringing in Down Payment

Most lenders require 15% to 20% of the loan amount to be paid as downpayment by the borrower. In case the amount is not available with the borrower, banks might reject the loan application. Hence, having sufficient downpayment amount available with you is necessary. If you don't have it, consider saving more or reducing your home loan requirement in line with lower down payment.

Deciding between Fixed and Floating Rate of interest

Most lenders don't allow borrowers to choose their preferred interest rate type. There have been instances where borrower chose fixed rate at the time of applying for loan. But lenders allow the rate to be fixed for first few years and then switch to floating rate without any intimation. This has been a cause of trouble for many borrowers in past and needs to be clearly discussed with the lenders.

So these are some of the common problems faced by borrowers. Make sure you read the fine prints of the loan documents before you agree to take the loan.