Reasons & remedies for housing loan application ‘rejection’- part 1
Whether you are a professional or a business person, housing loan application REJECTION can put your plans to buy your dream home on hold!
For buying a home upwards of Rs 60-70 lacs, not everyone has ready cash. So, to apply for a home loan, you need to make sure you have what it takes for your application to be APPROVED.
If you are eligible and qualify on all counts, you must do your research well, and choose the right home loan provider even before filing your application.
You must be prepared with all the required documents in advance so that the loan is granted without a hitch! More important, you must know if you have what it takes for approval without a hitch!!
That’s why it’s very important to know what causes a housing loan application to be rejected in the first place!
This will ensure that you are adequately prepared to undertake remedial measures to get your home loan application approved!
Major reasons for rejection of housing loan application in India
1. NOT having paid dues for other loans/EMIs from banking institutions
- As an applicant for a home loan, your credit history and records are checked by the lenders
- Your CREDIT HISTORY helps the home loan provider determine whether you or not you are a SAFE BORROWER for them
- No one wants a RISKY person. It is a pain as well as a risk for anyone to grant a loan to someone who has a history of DEFAULT on payments! Even banks want their EMIs to fall into their kitty without any follow-up effort!
- This means your timely payment of dues and EMIs of existing loans matters! If you have NOT been paying EXISTING LOANS and DUES on time, then your CREDIT HISTORY WILL REFLECT THAT!
- So, you simply need to be VERY PUNCTUAL and serious about EXISTING (Previous) LOANS and their TIMELY REPAYMENTS
- You can NOT afford to miss due dates or deadlines on existing/previous EMIs and credit card bills
2. Not having too many debts
- Too many debts mean your income goes down substantially servicing the existing loan burden. This leaves you less competent to service new loans!
- For instance, if you are earning Rs 1 lac per month after taxes, and are already paying Rs 30,000 per month as a loan REPAYMENT EMI, then your effective income goes down to Rs 70,000. This will REDUCE your eligibility for a home loan. Plus, you are assumed to be a HIGH-RISK borrower by banks! The result- REJECTION!!
- A lender always analyses your REPAYMENT CAPACITY. So, having more DISPOSABLE INCOME HELPS. If not, your run the risk of rejection!
- The solution is to clear or reduce your other/existing dues before you apply for the loan. This will make your existing income levels look favorable to home loan lenders
- Your existing income levels should be able to take the load of home EMI without disrupting your standard of living. If not, then it lowers the chances of your home loan approval
3. Home address same as some other defaulter
- A previous tenant or owner who has unpaid dues tends to come up as a reason for application rejection for your home loan
- So, watch out for this since the previous owner/tenant (a defaulter) may still have their records reflecting your CURRENT HOME ADDRESS
- Such irritants are sometimes unavoidable, but you can be conscious of such reasons, and fight it out with the lenders if the need be
4. Stability of income and job
- Frequent changes in jobs are also seen adversely since that indicates that you cannot continue in the same job for long
- The banks may not know the reason for your job change, so frequent job changes are taken at face value!
- Although this may not be the case for all banks, it could be one reason for a rejection
5. Applicant age being near retirement while applying
- The borrower’s age being more than 50 years old could be a reason for rejection since the repayment tenure goes into a RISK zone
- Lenders get hesitant to give loans when repayment capacity and health reasons are viewed as grim after a few years
- In such cases, it is prudent to apply for SHORT TERM Loans with less than 10 years of repayment. But this also means bigger EMIs, and loans are approved only if the borrower has the wherewithal to afford a home loan
6. Poor Credit Score in CIBIL
- A high credit score high helps your approval
- Good credit helps when you apply for a loan. CIBIL (Credit Reports and Risk Management Solutions) records your credit score
- This is the MOST IMPORTANT reason for a rejection
7. Previous rejections recorded by CIBIL
- CIBIL records rejection of other loan applications too, and these form part of your credit records
- If you have applied for a home loan, and rejection happens, then make sure to analyze why that happened, do your research, and NOT repeat the same mistakes the second time
8. IT returns must be filed every year
- You must file your IT returns whether or not you have a form 16
- A clear track record of filing IT returns goes in your favor and is surely checked by home loan lenders
To know more about “4 Things To Know About Housing Loan Application Process”. Click here!