Home Loan plays an important role in helping one finance and buy their dream home. You may want to buy a new home or construct one from the scratch, applying for a home loan has a few formalities starting from submitting application to disbursement of loan amount. Keeping basic documents in hand ready saves time and efforts. More often than not new loan applicants are unaware of the complications involved in filing a loan application as several papers and formalities need to be fulfilled. It is usually difficult to get all the details right the first time.
Here are the top 10 reasons due to which your loan application could get rejected
1) Your address is on the defaulter’s list
So you have shifted to a new rented house where someone who hasn’t paid up on a loan or has exorbitant credit card dues and this address is in their records. All banks will probably have the address stored in their defaulters’ database. In this case, there is a high probability of your application being rejected.
2 ) Do you have unpaid dues?
The ghosts from your past can come to haunt you! Accumulating credit card dues, late EMI payments, can all be a major reason for loan rejection. The only option to overcome this issue is to make all your payments on time and not skipping deadlines. To avoid any problems, keep a check on your bills and credit repayments.
3) Do you already have other debts ?
If you are juggling with too many debts, then your income minus the ongoing credit repayments is what will be considered as your real income. If availing for another loan will make it difficult for you to repay, then your loan will be rejected.
4) Have you been a loan guarantor to a defaulter ?
When you sign the dotted line to be someone’s loan guarantor, you should make sure that the applicant has the ability to repay the loan. Unless you have strong reasons to believe in them, do not rush to sign because if they fail to repay, you will be responsible to repay the loan on their behalf.
5) Would your age be a concern ?
If you are nearing retirement age, then banks would be hesitant in giving loans as you will have no repayment capacity after a few years. A few may be ready to offer short term loans up to the date of retirement. But, short term loans for huge amounts would shoot up the EMI, making it a heavy burden on the borrower. Hence, banks are likely to reject home loan applications.
Ask your Question here - #HomeLoantalk
6) Have you jumped too many jobs ?
You may not realize it, but being a frequent job hopper can reflect poorly on your loan application. Banks place a lot of importance on job stability so insist that an applicant must be employed with a particular organization for three years or more to be eligible for a home loan. In some cases where a reputed company’s future appears unstable, the bank can reserve its right to provide loan to an applicant from that company. Thus job stability is an important factor considered by banks while giving loans.
7) Has your loan application rejected before ?
When your loan application gets rejected, it gets recorded in your CIBIL credit score. So wait till you receive an offer from one bank before applying to another. This will give you a chance to rectify the errors in your application before you approach another lender.
8) What type of residential property have you placed as security for the loan ?
Did you know that not all types of residential properties are suitable securities for home loans? Generally, lenders prefer properties that are easy to sell, in demand and have stable prices. So while choosing your property keep in mind that it is not very old and built by an established and trusted builder who has all the necessary documents for easy sanction of your loan. If there is a problem with the title, layout etc., your loan application could get rejected.
9) How good is your credit score ?
Credit score is a significant deciding factor in sanctioning home loan. Make sure you have a good credit score in place before applying for the loan.Here are a few ways to improve your credit score.
10) Do you file your income tax regularly ?
Ensure you file your income tax returns , irrespective of whether you get Form 16 from your employer or not. It is very important to have a clear track record of tax returns for the past two years before applying for a home loan.
Do you have any other reasons due to which your home loan got rejected? Share them with us and help new loan applicants avoid the mistakes you made!
Do you have many unanswered home loan queries ?
Join us on Twitter this Friday for a Tweet Chat and get them answered by our Home Loan Expert.
When : 25/4/2014
Time : 4:15 – 5:15 pm
Hashtag : #HomeLoantalk
Expert : Mr. Rakesh Makkar, President & Chief Distribution Officer, DHFL