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Know the Reasons Why Your Home Loan Application Got Rejected

Updated on: 14 Dec 2021 // 20 min read // Home Loans
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Housing is one of the most important subsets of the real estate sector which also includes retail, hospitality, and commercial segment. Housing is quite significant to the Indian middle class which has been rising and making inroads due to rising incomes and subsequent improvement in their standards of living.

Last year the Indian Government had also focussed its energy on promoting and providing mileage to the “housing for all by 2022” mission through Pradhan Mantri Awas Yojana, which aims at providing affordable housing to the masses. This was essentially aimed at providing support to the property developers by helping them clear their burdening inventory due to real estate crisis which threatened the once prosperous real estate market while also sparing the home buyers with unnecessary hassles and to safeguard their interests due to the considerable investment they have to make.

 
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Taking Home Loans from banking institutions is usually the safest and most reliable option for any prospective homebuyer to make their dream home a reality. While widely accessible, any Home Loan approval is dependent on several factors that are to be diligently taken care of by the prospective buyer. Extensive research has to be undertaken which in the long run will not only save a lot of time and inconvenience but will also ensure that your loan application is processed at the first go.

To facilitate the complicated process of Applying for a Home Loan and to ensure that the Home Loan application is not rejected, here are eight aspects which will need your minute attention:

1. Credit Score:

It is necessary to maintain a decent credit score irrespective of which loan you apply for and the same stands true in case of a Home Loan. Make sure you know your creditworthiness by accessing your CIBIL records which are readily available these days and keep up efforts to avoid delays in repayments if any.

2. Loan to Income Ratio:

There is a high probability that your Home Loan Application might get rejected in case your existing as well as desired loan amount does not cross the 50% mark in terms of your income.

3. Documentation and Due- Diligence:

Documentation is an important aspect of your loan application and subsequently its approval by the relevant banking authorities. Prospective homebuyers should make sure to perform thorough due diligence and keep necessary documents accessible at all times.

4. Employment Status and Stability:

Home Loan is usually a long-term commitment and hence the banking institutions will ensure that the applicant is not unemployed or has a stable career/job so that repayment is guaranteed. It is very likely that your loan might get rejected in case you constantly keep on switching jobs or there is a considerable gap between employments. It is highly preferred if you are working in the same organisation for at least three to four years.

5. Property and Builder Approval:

Make sure the property has been allotted the necessary approvals from the local civic bodies/agencies and also the builder should be ideally registered with the major banking institutions. Non-adherence of both these criteria could be a ground for rejection of your Home Loan. With illegal encroachments on the rise in most urban centres, the majority of the banks would be highly cautious while evaluating your intended purchase of the property.

6. Age of the Applicant:

In case the buyer is approaching their retirement, the bank might hesitate in approving the Home Loan. It is always advisable that the loan is applied after including the income of your spouse or children in the application.

7. No Dues Certificate:

Make sure you have obtained a no dues certificate from previous lenders to ensure there are no speed bumps in getting the bank’s approval stamp on your loan application.

8. Other Factors:

In addition to the above-mentioned factors, several minor but important aspects could negatively affect your chances of getting a Home Loan such as previously rejected loan applications, income tax return filing, unavailability of a landline telephone, unverified address, low income, errors in credit score calculations, and if you are an early starter in the entrepreneurial sphere.

It can be a tricky situation if a Home loan Application is Rejected having short or long term implications. Hence it is very important that instead of applying for the loan in a hurry and denting your chances of getting it approved in the first attempt, all the necessary aspects discussed above are covered for. This will, in turn, assure you of realizing your dream of being a proud homeowner into reality which is after all one of the greatest milestones in the life of any individual.

Also Read: 10 Reasons Why Your Home Loan Got Rejected

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