Home loans are usually availed to meet major finance requirements. Keeping the property papers and other documents ready, studying the loan market thoroughly, preparing a financial overview; all these are borrower’s pre-application tasks. However, there are numerous other pointers a prospective borrower should keep in mind for the successful approval of the loan.
A first-time loan borrower might not be aware of these intricacies. Even applicants who are familiar with the entire procedure might miss out on certain formalities or paper works. The same often leads to the rejection of his or her application for a home loan. To ensure a smooth loan withdrawal process, the applicant must also study the potential reasons behind the rejection of a home loan application.
Here are 4 of the most common reasons behind home loan application rejections
All the financial institutions check the applicant’s credit history before approving their request for a loan. While the timely payment of EMIs and bills enhance your CIBIL score, unpaid dues harm your score.
On figuring out your untimely bill payments, the authorities will be under the impression that you are not financially responsible and credible. Such an impression is most likely to lead to a loan rejection. To avoid such circumstances, a borrower must maintain a positive credit history by paying bills and dues on time. A score of above 750 is generally concerned a good score to avail of a home loan.
Age of the borrower
The age of the applicant often determines his or her capability to repay the loan. If the applicant is someone who is about to retire from his job in a few years, the lending institution may be hesitant to approve the application. Financial institutions consider individuals who can generate income for more than a few years more eligible applicants.
Suitability of the mortgaged property
The property you wish to mortgage also has to pass certain criteria to be considered as acceptable. Financial institutions acknowledge properties for a mortgage that has substantial market value and are easy to sell. Factors like how old your property is, which builder has constructed it, present condition of the property; all these are considered before accepting the property under the clauses of the home loan agreement.
Property papers are a crucial part of the documents required for home loans. Note that issues related to layout, title, ownership or authentication may lead to the rejection of a home loan application.
Numerous loan rejections
Repeated loan rejections in a borrower’s credit history might result in loan rejection as well. The authorities of CIBIL record the count of loan applications and rejections of an individual. A lending house may be unwilling to extend a home loan to an applicant who has too many loan rejections against his name.
If someone is in urgent need of money, he/she is likely to reapply for a loan even just after facing rejection. The second application is most likely to get rejected as well. Thus, one rejection leads to another, and the cycle goes on. A borrower must spot the factors responsible behind it and rectify it. Having zero loan rejections in your credit history thus qualifies as an implicit factor under home loan eligibility criteria.
To avoid home loan rejections, an individual must take action beforehand. He/she could take note of the above points and rectify loopholes accordingly. They should also opt for lending institutions that are comparatively lenient on loan approvals.
Breaking free from the cycle of loan rejections could be a cumbersome process. But if a borrower is aware of the reasons that lead to such rejections, half the work is done. Also, make sure to maintain a CIBIL score around or above 750 and refer to top lenders for the most beneficial loan terms and features.