Reasons Why Your Home Loan Application Can be Rejected

Home loans today are easily available to borrowers, given the rising demand for them and the willingness of lenders to offer competitive deals.

By Talibuddin Khan
Thu, 30 Jun 2022 09:59 PM IST
Minute Read
Reasons Why Your Home Loan Application Can be Rejected

Most of us need the help of a home loan when we decide to make a property investment, given the average cost of residential properties today. Even if our savings are enough to fund such an expensive purchase, making a lump sum payment can be difficult for most. A home loan helps substantially in such scenarios, as it means a sizeable loan amount that can enable you to buy the property you want without funding being a constraint.

Home loans today are easily available to borrowers, given the rising demand for them and the willingness of lenders to offer competitive deals. However, most lenders expect prospective borrowers to meet a set of eligibility criteria that are the bare minimum and submit the supporting documents to be able to receive the home loan amount they desire.

Ensuring that you meet the basic eligibility benchmarks is crucial for home loan approval and disbursal. However, not many borrowers are aware of the eligibility criteria entail, and how missing even one could lead to home loan rejection. Having your loan application rejected will not only delay your home buying plans but will also adversely impact your credit profile and CIBIL score. In this article, we list all the potential reasons why borrowers may face home loan rejection to help them avoid such a situation.

Common Reasons for Home Loan Rejection

Here are some common reasons why applicants can face rejection on their home loan applications. Before you apply for a home loan, it would serve you well to ensure that you avoid all of these.

1. Inadequate Repayment Capacity

The home loan amount you seek should fit into your repayment capacity; meaning that you should be able to sustain the EMI payments without difficulty. Lenders consider this factor seriously, as sanctioning a large sum to someone who may not be able to repay it in time increases the risk of default.

2. Other Ongoing Debts

If you already have a high number of ongoing debt obligations, you may not be eligible for a home loan. Lenders can hesitate like approving your loan application as your repayment power is already at capacity with other EMI payments, leaving little to no room for a new EMI obligation.

3. Low Credit Score

Lenders inspect applicants’ credit profiles and CIBIL scores closely before approving their applications. One’s credit profile and score summarise everything that the lender would want to know about their repayment habits and financial discipline – allowing them a realistic metric of the applicant’s debt behaviour. If your credit score is under 725, it can be difficult for you to land the home loan deal you desire.

4. Uncertain Income and Employment

Your income and employment status are of utmost importance to the lender as this is directly related to your ability to pay the EMIs on time. If you are not employed at a stable company or have too many job changes in a short period, it may not bode well for your home loan application, as it established no dependability of an income source.

5. Property Value Assessment

If the property of your choice fails to meet the lender’s property evaluation criteria, you may not receive a loan sanction for the same property. Property-related factors that are checked are the age of the property, its market value, developer profile, or possible legal issues.

Concluding Thoughts

Now that you have a clearer idea of the possible things that can get your home loan application rejected, you are better positioned to apply for a home loan. If you’re still unable to adequately meet the lender's home loan eligibility criteria, consider applying for a joint home loan with a co-applicant to boost your chances of approval. You can also use a home loan calculator tool to assess your home loan eligibility before you apply so you can take corrective measures and improve your profile.

 

(Note: This Article Has Been Written By Brand Desk)

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