Owning a home is a dream for most of us. The sky high property rates all over the country have made owning a home very difficult. However, banks have made this task for us much easier with the concept of home loans. Many financial institutions like Banks and NBFCs live on this. Loans are one of the highest income generating products for these institutions. However, there are possibilities of them rejecting a home loan application. It’s major setback for someone who is dreaming about a home and does not have sufficient funds for it. Here are five reasons why your home loan application could be rejected:
1) Credit Score
This is one of the first things that a financial institution checks before processing a home loan. You must have seen a recent ad which says, “What’s in a name? Check your Cibil Score.” Minimum of 700 is needed to secure any loan. More the score, better the chances. There are several ways to maintain a good healthy score such as not sending multiplications for credit cards/loans, not defaulting on EMI payments, etc. You can check your score before applying for a home loan and work on improving it in case it is low.
2) Employment status
Banks issue loans trusting you to pay them back after sometime. Hence, your employment status is very important in this regard. Employment in a reputed company with decent income increase your chances of getting your application approved. Also, your consistency with a company matters a lot. If you keep jumping companies too often, it does not send a good signal.
3) Your previous application has been rejected
Remember, everything is online these days. If you have already applied for a loan before and it has been rejected, there are greater chances of your current home loan application being rejected once again. Banks view previous rejection as a bad omen. In case there is a genuine reason behind the previous rejection, you can discuss this with the bank. However, if it was due to default or bad credit score, it’s better you work on it first and only then apply.
4) Property related issues
Before approving a home loan, banks conduct a thorough check of the property. The title of the land, builder, location and other related aspects of the property play a prominent role in loan approval. Hence, you can conduct a self check on all these issues before applying for a loan. Avoid purchasing properties in panchayat areas as most of the banks do not issue loans to such properties.
5) Address is on defaulter list
Finally, if your address is already on the defaulter list of the banks, there are higher chances that your application would be rejected. If you have defaulted on your credit card payments before, your address is sure to get onto the defaulter list. There are also chances that you have moved to this address recently and the person who had lived here before has defaulted on his credit card/loan. In such cases, you can talk to the bank and explain the genuineness.