A home loan is generally one of the enormous borrowings a person takes because buying a home is the major expense a common person makes in his or her life. It is, therefore, not surprising that lenders are cautious when it comes to disbursing housing loan. Some of the most common reasons why housing finance companies reject applications for home loans are:
Your loan application may get rejected due to your poor credit score. A poor score is an indication that you have been defaulting payments of your existing loans and credit cards. However, a bad credit score may be due to incorrect reporting of your payment records by the lenders as well. Therefore, check and get it corrected if required before making a home loan application.
Age of the applicant
Home loans generally have a long tenure, going up to 20 or even 30 years. So if your age at the time of the application is high, lenders may be wary of accepting your application. If you are poised to reach a maximum of 60-65 by the time the loan expires, it is fine with the lender. Having a younger co-applicant, be it your spouse, children or sibling, can increase the chances of your loan getting approved.
The lender will see how consistent you are with your employment. A home loan is a long-term commitment, and if you have frequently changed your jobs, it won’t bode well with the people processing your loan application.
Housing finance companies approve home loans up to a certain amount only, for a given level of income. They have income limits for applicants, which may vary from city to city depending on the cost of living indices. If you have low income and do not fall in the income limits of a lender, your loan application won’t get through.
Loan to income ratio
Your total loan liability, including the one you are applying for, shouldn’t exceed 50% of your income. This is a rule of thumb that lenders follow and if you have several existing loans, the new application may get rejected. Your loan to income ratio will go beyond 50%, and the lender might consider you overburdened with loans.
Loan guarantor to a defaulter
If you have been a loan guarantor to a defaulter, it will jeopardize your loan approval chances. Be careful while taking up this role.
Previously rejected loan applications
Loan application rejections become part of credit records. If your applications have been rejected in the past, it can lessen the chances of your new application getting approved. Therefore, it is essential to know the reason for the rejection and not repeat the mistake.
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