5 Reasons Home Loans Get Rejected

Led by positive steps like RERA and encouraged by the highly lucrative home loan rates, the prospective Indian home buyers are looking out for suitable projects and opportunities to invest.

However, when it comes to availing home loans, there is more to it than what meets the eye. Borrowers are often disappointed when their loan application is rejected.

Being aware about the common reasons for rejections helps you plan well and ensure that your application sails through. Here are five common reasons home loans get rejected:

  1. Poor Credit History

A loan approval depends on the CIBIL score. The higher the score (out of 900), the higher the creditworthiness of the borrower. Luckily, awareness about credit scores is steadily rising in the country.

As per a recent survey by TransUnion CIBIL, almost 74% of the respondents said that they check their credit score at least twice a year. However, up to 62% respondents were not aware that even lenders check consumer credit scores to determine the terms of a loan.

Since the credit score influences the lenders decision, one should ensure that your credit score is healthy. Here are some steps in that direction:

  • Make full EMI payments before due date
  • Avoid restructuring loans
  • Use credit cards smartly, avoid late payments
  • Avoid multiple loan applications within a very short time
  • Keep a track of your credit history (can be availed free of charge from your lender)
  1. Inadequate Income

The loan you can avail depends on your income, assets, and savings. A simple home loan eligibility calculator allows you to get a sense of the amount that you be offered to you. A steady source of income, with adequate income proofs need to be submitted for detailed investigation. Most lenders finance up to 85% of the property value, your readiness to pay the remaining as down payment also influences their decision.

  1. Limited Cash Flow

While you might have established your credentials for availing a particular loan amount, lenders also need to ascertain that you will have enough cash flow to pay the EMIs. Weak or sporadic cash flows can dent the chances of availing a home loan. Lenders like to look at stable avenues like a stable job, rental incomes, business incomes, etc., that give you regular and increasing cash flows.

  1. Borrower’s Old Age

The age of the borrower gives the lender a sense of the possible tenure for the loan. A person in his 30s generally has more active working years compared to someone in his 50s. Lenders are more likely to lend to a younger borrower, provided he/she has a steady source of income.

  1. Poor Project Credentials

When investing in a fresh project, it is important to ensure that the builder is RERA compliant, and that the project is certified. A potential lender may not fund a borrower if the project lacks credentials.

In case you are buying from the secondary market, lenders check the documentation of the property to ascertain its ownership, clarity of title, NOC from the building committee. In addition, they might also seek a formal valuation of the property. If the valuation is lesser than the negotiated price between the buyer and seller, the funds approved might be lesser than demanded.

A careful research and market survey on the part of the borrower go a long way in securing the loan.

Edelweiss Partners is one of the largest home loan distributor in India. Here, you get expert guidance for loans products, best interest and attractive referral commission. Talk to us to learn more.

 

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