3 minsApril 23, 2016
You have done everything right, but you are still left analysing the outcome of your loan application. Having your loan rejected is the most frustrating feeling, especially if you are in dire need of one. Before you jump into the next bank to
apply for one, make sure you have all your bases covered.
When you apply for a home loan, the bank has every right to accept or reject the same. In case your loan is rejected, your
bank may or may not tell you the exact reason. While you cannot demand answers or explanations from them, you should definitely be aware of situations where your application is rejected.
Some of them are listed below.
Credit score
More often than not, a low credit score is the prime reason for your home loan getting rejected. Even one missed credit card payment or payment mismatch in income
can be the reason for rejection. As your income is not considered by CIBIL, it’s not taken into consideration while determining your creditworthiness.
Repaying capacity
When you are requesting for a loan, a representative of the bank does a background check on your income to ascertain if you are capable enough to repay it. However, if your principal borrowing amount is beyond your loan payment capacity, then
there are chances your home loan will get rejected. upfront. Before applying for a home loan, it's also important to check your home loan eligibility and ensure you have the necessary documents prepared.
Documentation
Submitting proper documentation, evidence and paperwork is the prerequisite for any loan, more importantly a home loan (due to the enormity of the amount involved). If your papers are incomplete or if you have submitted false information or if
your signatures don’t match on the papers, your application will not be processed further.
Lack of income
If you lose/quit your job midway during your loan application process, your bank comes to know of the same through background checks. Since you have lost your repaying capacity, your loan gets rejected, even though it passed the initial approval
stages.
Existing loans
If you apply for a home loan, when you are already deb-ridden with previous loans, the bank has the right to reject your loan on the grounds of your liabilities being higher than your income. The bank has the right to think that your leftover
income (after honouring all existing commitments) wouldn't be enough to meet home loan EMI that you have requested.
Does not fit the bank’s policy
Sometimes the internal policy of the bank may find fault in the area of construction or the credit profiles are negative and may not sanction the loan. If this is the case, then it is good option to talk to the bank officials and find a way around
it- through collaterals and guarantors. Also, sometimes banks don’t fund buildings which are 20 years and older.
Also Read: [8 Step Home Loan Application Process Explained]
Hence, it is important to check all areas and take into consideration the banks viewpoint before jumping banks to get a loan to ensure your loan is accepted and can begin living your dream.
