Common Home Loan Problems Faced By First Time Borrowers

By | June 19, 2016

Common Home Loan problems

The journey to your dream home might be a bit rocky. But we got you covered. Here, we list down a few of the most common problems that first time home owners might face when applying for a Home Loan. Read on to find out what they are and how best to avoid them.

Crossing the first hurdle

You might be surprised to know that many Home Loan applications don’t even pass the first stage of verification due to discrepancies between the credentials provided by you and the bank’s requirements. If you don’t meet the age or income criteria set by the bank or the bank is unable to verify the details provided, your application is most likely to get rejected. The best way to avoid such a scenario is by carefully checking the requirements of the lending banks and applying only to those which match your profile. Also, ensure that you have the proper documents handy and provide accurate details to the bank.

Non-refundable processing fee

It’s common knowledge that the processing fee that you pay along with your Home Loan application is generally non-refundable. Usually banks ask for 0.25% to 1% of the loan amount as processing fee and this amount is usually not returned even if your loan is not sanctioned. Some banks might promise to refund the processing fee if they don’t approve your application. In such cases, it’s best to get it in writing, making sure that the clause can be enforced. It’s best to keep all communication legally documented instead of relying on the verbal statements by the bank executives.

Boosting the bank’s confidence

Banks sanction your loan amount only after they’re confident that you can repay the entire amount. There are several factors which they take into consideration before approving the loan, such as your monthly income, Credit Score, employment details, etc. If you feel any of these factors will not be favourable to you, you can increase your chances of getting the loan sanctioned by adding a co-applicant. However, only your spouse, parents and children can apply as co-applicants. If you have made sufficient investments to NSCs, Provident Fund, LIC policies, etc, you have the option of offering them as collateral against your Home Loan.

The interest rate dilemma

Deciding on a fixed rate or a floating rate of interest is a nagging dilemma you will have to face when you apply for a Home Loan. Even after you decide, the interest rates might fluctuate in the future. The best way to not get caught in a tricky situation where your interest rate is hiked is to go through the terms and conditions with utmost care. Also, check with your bank to know more about the historic trends in interest rate fluctuations. Knowing the past trends will help you choose better between fixed and floating rates of interest.

Bank evaluation Vs your personal evaluation

Banks have their own team of experts to appraise the property you want to purchase. Any and all evaluation will be done only by the banks’ legal, technical and financial teams and they will not consider your personal evaluation. Sometimes, the evaluation made by the bank will be lower than the price you quoted. In such cases, the bank will lend only as per its own evaluation, leading to a substantial gap between what you need and what the bank is ready to lend. A wise way to avoid this situation is to first get the property evaluated by a bank approved valuator.

Correct format of title deeds and NOC documentation

The title deeds and NOC documents need to be produced specifically in the bank’s format. If you don’t produce the documents in the format specified by the bank, your Home Loan will get rejected. To avoid being in such a situation, ensure that you know what documents are required and the format they should be presented in. Take care to get them ready within the stipulated time period as well.

Additional Reading: 5 Home Loan Options you didn’t know about

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One thought on “Common Home Loan Problems Faced By First Time Borrowers

  1. Rishika

    The borrower must ask the lender to get a valuation done even before the sanction of the loan. Else, the bank will value it at one figure and you will be buying it at another.


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