Purchasing a house is likely the biggest financial transaction of one’s life. It is much more than selecting the right property, it is about affording the purchase with minimal impact on other expenses – to enjoy a satisfying life with zero worries about debts.
With the tenure being as long as 30 years, home loans are a long-term commitment with the lenders that demand a stable repaying capacity. Due to this reason, financiers usually run a thorough checking on various factors before approving the loan for an individual. Being declined for a home loan can be disappointing, but it doesn’t mean that one cannot learn what went wrong and apply again – instead of dwelling on the disappointment.
It is important to understand why exactly you were declined a home loan because it allows you to pinpoint areas of your life that need improvement. As financiers are required to mention why the loan was rejected, you have all the information you need to correct the situation. Here’s a few factors that might be the cause of an application rejection:
- Bad Credit Score
More often than not, a bad credit score is the top reason why lenders reject home loan applications as this score tells them whether the applicant is a risky investment or not. A great credit score is considered to be 750 or above and financiers assess the individual’s creditworthiness through this score. A bad score is a result of defaults in making payments on current credit card bills or existing loans. This is an indicator the the lender that you might not repay your future home loan. Sometimes, a bad credit score may also be due to incorrect information provided by the financier to the bureau. So, it is important to get the report fixed in order to be eligible for the finance.
- Low income
Every bank or NBFC has a standard income limit for individuals based on geographical locations. Usually, the income requirement is high for people living in metro cities. If one does not fall in the minimum income limit, their home loan application might be denied. Lenders can also tell if an individual might be able to afford the EMI payment by looking the the income to debt ratio. If one is already stressed with too many loans, lenders assess this ratio and if it goes above half the individual’s income, the loan might not be approved.
- Property might not be approved
One of the most unexpected reasons for a home loan rejection is when the specified project launched by a builder is not approved with the concerned bank. There are many cases where specific phases of a project may not have the approval of a bank. Hence, in order to avoid home loan rejections, it is critical to check that apart from the builder, the entire project is approved too.
- Insufficient employment history
When applying for a home loan, a consistent employment history can be a very valuable thing. Many financiers require at least two years of consistent employment before approving the loan. The reason is that they want to know if you’ll be able to hold your current job long enough to pay back the money that has been sanctioned to you. Also remember to have proof of your employment as well, which includes tax information and pay stubs.
The reason for your home loan application can be any of the above reasons. With a little effort and patience, you might be able to put yourself in a position to be approved the next time you fill that form.
Wondering how to get a quick home loan? You can apply for online home loans at Clix Capital as they usually have flexible plans and quick approvals.