There is no bigger dream that the dream of owning your own home, but, this dream could be hindered easily by a rejected home loan application. There are many common reasons behind a home loan application getting rejected like poor credit score, tainted credit history, insufficient income, missing information being the top ones. However, many lesser known reasons could also lead to an application not making its way through the process. Let us look at ten such reasons:
- Educational Qualification: A good educational background is taken as a guarantee against joblessness and thus, many lenders take this criterion very seriously. They check the stage of education, the passing institution, the ranking, etc.
- Minimum Experience: It is common for young professionals to apply for credit cards, car loans, and personal loans soon after they start working. However, in case of personal loans, lenders prefer a minimum of three years of work experience
- Too Many Dependents: Having more than three dependents invites suspicion of repayment from the lenders and is often frowned upon. The more dependents you have, the greater are your expenses, and the greater is your ‘risk’
- Property Valuation: It is a normal practice among borrowers to inflate the price of the property to get more loan out of the bank. This mismatch, if caught by the credit team, leads to straight rejection of the application. Lenders sought a verified property valuation report before processing a home loan application
- Too Many Co-Borrowers: Most lenders would frown upon an applicant with more than three co-owners. Above this, only special cases are considered, but generally, the loan is rejected. It is also advisable to be mindful of such applications as a rejection can affect your CIBIL score negatively
- Frequent Job Switch: This is again related to financial stability of an individual. An individual who is switching jobs frequently is often considered a weak applicant who may falter on repayments due to such instability. Those who are in-between jobs are also considered a ‘risk’. It is advised to stay in an organisation for a minimum of two years before applying for a housing loan.
- Employers Status: Just as educational institutions, banks have lists of companies which are stable and unstable based on their market performance, valuation, customer sentiment, records of clients, etc. In case, your employer is on that list, that chances of your rejection are significantly high. Start-ups and self-employed individuals are also considered weak applicants, given their unpredictable prospects.
- Property Status: Lenders look at 20 (or more) years of repayment, plus extra 20 years of longevity when extending a housing finance. If the property you are looking at buying is too old, or does not fit into this time-frame, the chances of rejection are high
- Builder or Property Unapproved: A builder who does not stand in the bank’s list of approved builders (based on financial liquidity and other factors), or the project he/she has launched is not approved by a bank, the chances of an outright rejection are high. It is advised to check builder history and status, project details, etc. carefully before applying for credit
- Blacklisted Property: In case of a default, banks blacklist both the borrower as well as the property nowadays. Property background check is also thoroughly examined by the lender before extending home loans to borrowers.
The above reasons are not the most obvious reasons for a home loan rejection, and only highlight the need for precaution when applying for a home loan. Ensure that you ask your lender the exact cause for the rejection, upon its incidence, and ensure that the same problem does not arise again.
Tata Capital offers flexible home loan eligibility criteria, attractive interest rates, fast loan approvals, and easy documentation for its home loans. With home loan interest rates as low as 9.25%, Tata Capital guarantees you a hassle-free journey towards your dream home!