For someone who has been aspiring long enough to get their dream home, the rejection of their Home Loan application is extremely disappointing. There can be a number of reasons for this rejection and while some reasons are entirely to do with the bank or the NBFCs’ internal loan guidelines, there are some common mistakes that Home Loan applicants tend to make and which can be easily avoided. Here are some of them:
- Instability in Career: One of the things that the lender will check first and foremost is the ability of the borrower to repay the loan and that is dependent on the income of the person. Hence, anyone who has changed jobs very frequently in the recent past prior to applying for the loan and has shown quite a bit of fluctuation in income, might find that their application has been rejected.
- Low Income: Certain banks have set income criteria which the applicants should meet to be eligible for a Home Loan and anything lower than that would mean the person might not qualify for the loan. Banks and NBFCs only use about 45% to 55% of the person’s salary as their EMIs and so if the person already has a very low income, there is hardly left anything from the balance from which the banks will be able to deduct their EMIs. Hence, the loan to income ratio should be maintained. An online Home Loan EMI calculator can be used to determine whether one can successfully pay off the EMIs or not.
- Property Approval: Make sure you choose a property from a builder who has a good reputation and has had no problems with his past projects. Banks will always conduct a search on the property before disbursing the loan and if they find that there are any kind of shady dealings with the property, or the documentations are not correct, the will reject the loan application, in spite of everything being okay from your end.
- Age of the Borrower: The age of the borrower matters while applying for a Home Loan and most banks and NBFCs will not approve a borrower who is over 55 years of age, in case of salaried individual and 60 or 65 in case of self employed individual. If he happens to have very good income and has proper documentation o prove it, then the loan might be approved but at a higher Home Loan interest rate as the lender would want to get back his money as early as possible.
- Credit Score: Not having a strong credit score is one of the foremost reasons why most Home Loan applications are rejected. This is one of the most straightforward methods by which the lenders determine if the borrower is regular with his payments or not. Credit cards debts are the easiest to accumulate, along with other bills etc and all of them should be cleared before applying for the loan to build up the score.
Right Documentation: It is important to have the required documents for Home Loan to get approved and this can happen when certain key papers are in place. Photo ID and Age Proof, Address Proof and the IT returns for the last three consecutive years are always required. For salaried people, one would have to provide the salary slip of the last six months and the bank statement of the last three months. Those who are self employed or have their business will have to provide the TAN as a business proof, along with sales tax documents.