Want to know why your application for a Home Loan was declined? Let’s take a look at the potential reasons.
Has your Home Loan application been rejected? We know how discouraging it feels. But it’s not wise to dwell on failures. Instead, let’s take a look at what could have possibly gone wrong.
Understand why your application has been rejected and learn from this experience. This will help you identify aspects of your financial behaviour that need inspection and improvement. Try recognising patterns in your financial activity, such as delayed payments, and begin rectifying them immediately.
Additional Reading: The Dos And Don’ts For Home Loan Prepayment
Being rejected for a Home Loan once doesn’t mean that you will never be approved. Let’s go through some of the reasons that could have prompted the bank to decline your application.
Unsatisfactory credit history
Lenders consider your credit history as a reliable decision-making tool because your credit history is one of the sure-shot ciphers of your credit habits.
Reports of missed or delayed Credit Card payments, previously rejected loan applications, and too many applications for loans remain in your credit report for years. What’s even worse? Such factors bring down your Credit Score and consequently damage your creditworthiness.
Negative remarks such as foreclosure and bankruptcy may portray you as a risky investment for the bank. More often than not, a low Credit Score is the primary reason for the rejection of your loan application.
Got a low Credit Score? It’s not too late as we’re here to help. Check out the link below for tips and tricks to improve your score.
Additional Reading: 3 New Year’s Resolutions To Raise Your Credit Score In 2019
Insufficient or unstable income
Are you a job hopper? Changing too many jobs reflects poorly on your loan application. Unstable employment is one of the chief reasons for banks to deny loans.
Many lenders approve an application only if the applicant has two years of constant employment. Keep in mind that you need to hand in valid proofs of employment to the bank.
Here’s another factor to consider. If the down payment is too small, lenders may not be willing to accept your application. Don’t be daunted by the task of paying a huge sum at one go. Your home is one of the biggest investments you will ever make. So why not start saving already?
Additional Reading: 5 Smart Ways To Pay Off Your Home Loan Faster
Incorrect or incomplete documentation
Review your credit report regularly and fix errors such as mismatches and inaccurate documentation of Credit Card transactions and incorrect signature.
Submitting updated and valid documents as evidence is a necessity for a Home Loan application. In the event of submission of false information, your application will not be processed further.
Haven’t been taking your Income Tax Returns (ITR) seriously? It’s high time you started because lenders and banks look out for a clear track record of your ITR filings of the last two years before approving your application.
Make sure to have an accurate, complete, and updated list of assets and finances to provide to the bank for verification and approval.
Additional Reading: 5 Ways A Joint Home Loan Works To Your Advantage
Having too many loans on your plate can leave lenders with a sense of uncertainty about your financial decisions. This may provoke the bank to act safely and deny you a loan.
A lender decides to approve your application only after reviewing your income-to-debt ratio. If you already have one or more existing loans, lenders will verify if your liabilities are greater than your income.
Don’t be deterred by this because you can easily opt for a Short-Term Personal Loan to suit your finances.
Additional Reading: 6 Smart Ways To Manage Your Home Loan EMIs
Improper asset documentation or valuation-related rejection
The rejection of a Home Loan application isn’t always a result of the applicant’s shortcoming. In certain cases, the value of the property set as mortgage or security may not be able to match the amount applied for.
Properties that are in high demand, have a good resale value, and a stable price are preferred by lenders. Banks generally do not prefer funding buildings that are older than 20 years.
Additional Reading: Home Loan FAQs
Are you planning to get a Home Loan? An extensive list of mandatory paperwork and plenty of running around can make the process both daunting and tedious. On applying for Home Loans through BankBazaar, you can enjoy lowest interest rates and instant approval with zero paperwork.
Pro Tip: Now you can plan the repayment of your Home Loan better with the Home Loan EMI Calculator.