Is Your Home Loan Application Getting Rejected? These May Be The Reasons
With real estate prices and home loan interest rates becoming more affordable, now is a good time to sign up for a home loan. Not only does it help you meet a milestone in life but also gives you an asset to rely on during uncertain times. However, you can only get a loan on pocket-friendly terms when you meet the home loan eligibility terms set by your chosen lender. Moreover, your history with the repayment and handling of current debts plays a role in whether your application gets approved or not.
Though lack of income to support repayment is the most obvious reason why your home loan application may be getting rejected, there are a few other reasons why this may be happening. Read on to know more.
Poor credit history and score
One of the most important factors that affects your home loan eligibility is your CIBIL score. A score of 750 or higher is ideal and reflects both experience with credit and good repayment habits. A low score, on the other hand, positions you as a less reliable borrower with a higher potential for default. This may be one of the reasons your home loan application gets rejected time and again.
You can increase your credit score by ensuring timely repayment of existing loans and credit card bills, decreasing your utilisation of credit, not applying for too many loans at once, and ensuring you have experience with a mix of unsecured and secured credit.
The younger you are, the more likely you are to get approved, as this means you have more years in the workforce to be able to pay back the home loan. However, the lender will still want to see your employment history. An applicant with a stable career and less job hopping is preferable, as the lender is unlikely to take a risk on someone who has not shown commitment or secure finances.
Being a fresher in the workforce is also not preferred as lenders would like to see your earning or performance history. Ideally, you should have at least 3 years of work experience, preferably in one company, to increase your chances of getting approval for a home loan.
Fewer remaining working years
Older applicants may get rejected if they are close to retirement age. This happens because their years in the workforce are limited, and hence the home loan tenor is smaller. Since your repayment capacity decreases post retirement, the lender may be hesitant to take a risk.
For such an applicant, the lender may still calculate home loan EMI before rejecting the application. If it is higher than 50% of the applicant’s monthly pay, the chances of the home loan application getting rejected is higher. In such cases, you can take a joint home loan with a younger, earning family member to get approval.
Lack of proper documentation
There are many documents required for a home loan application, and you must ensure you have all of them in place before applying. You should:
File income tax returns on a timely basis. Before approving any home loan applications, lenders often check whether you have filed income tax returns for at least the last two years.
Prepare property documents that show the suitability of the property. Lenders prefer properties that have a stable value, long-term structural stability, and can draw a good resale price. The lender is also likely to prefer a property constructed by a well-known and trusted builder.
- Get an NOC (No Objection Certificate) for earlier loans that you have paid off or closed. This helps the lender see your history of timely repayments.
- Check your CIBIL score. This is important, especially if your home loan application has been rejected before. These rejections reflect on your score, so take the time to make necessary changes before applying for another home loan or applying to a different lender.
Also ensure that your name, address, and other pertinent information isn’t spelled incorrectly or appears differently across documents. In some cases, this too leads to the rejection of your application.
The important thing is to stay prepared and know what the lenders are likely to look for in a home loan application. If you are ready with the right supporting documents, a good credit history, strong property valuation, and can show career stability and growth, it is likely that your home loan eligibility will increase, and your home loan will get approved before you know it.
Apart from avoiding the pitfalls mentioned above, choose the right lender who has simple and straightforward eligibility criteria for home financing. For instance, the Home Loan from Bajaj Housing Finance Limited has simple eligibility terms, offers ample funds, and comes with a nominal interest rate starting at just 6.75%. To reap its many benefits, strengthen your credit profile and apply today to start your journey as a homeowner.