How to Avoid Rejection of your Home Loan Application?
Real Estate is probably the most lucrative investment you ever make. But for most of us it is nearly impossible to pay the entire price of the house upfront. In such situations, it becomes necessary for us to turn to banks for home loan. Though the norms for getting home loan have been simplified in the last few years, banks still make you jump through hoops and turn a few pages of your financial life before finally granting the loan.
Here are a few points you should keep in mind to save your home loan application from being rejected:
1- Assess your financial capability
A bank grants loan only if it is sure of your repayment capability. It is a measure of the disposable income left with you after paying all existing EMIs. You will be granted a loan that will result in an EMI of 50% of the disposable income. So, you must assess your capability to repay the loan before applying for one.
2- Have a decent credit report
A credit report reflects a person's attitude towards financial transactions. Credit rating agencies like Credit Information Bureau (India) Limited (CIBIL) assign credit scores to individuals. Banks contact these agencies to seek a copy of your credit report to acquaint themselves about your credit history and financial habits. They also look for the existing loans on you and the trends of their payment. So if you have defaulted in the payment of previous loans or credit card bills, it is very likely that your application will be rejected. Also, standing as a guarantor to a defaulter may lead to rejection. To maintain an acceptable credit score, you should pay all your dues on time.
3- Provide correct personal details
You should make sure that the personal details in your credit report and those in your application form do not mismatch. If there is any change in the detail you must update the same to the lender. Also, you can seek your own credit report from the agencies on payment of a nominal fee. And in case there is some anomaly, you can fill the dispute resolution form provided on their website.
4- Have a stable job
Changing jobs frequently creates a bad financial image. Given that the repayment of loan is of utmost importance to the lender, he would want you to have a steady income. So if you are planning to buy a home in near future, avoid changing your job. In fact, the financial strength of your employer firm is also considered as a measure of your financial stability.
5- Loan application with relatives
In case you need a huge loan, there is a provision where you can have a co-applicant like your spouse, son or father. But clubbing your loan with any other relative is not accepted by the banks because of the possible disputes in future.
6- Property Value and Title
After considering other factors, banks value the property themselves and grant a loan upto 80% of the property's value. So you should make sure that you are buying the house at a price close to the market price. Banks may also deny you the loan in case the property title is unclear or disputed.
7- Rejection by other banks
Do not apply for loans from multiple banks at once. Rejection of the loan from one bank can have a negative impact on your credit score, resulting in rejection from other banks as well. So apply for a loan and wait for the bank's reply to know the reason as to why the loan is rejected and what you can do to correct the same.
8- Location of the property
Let's take the case of properties in Noida Extension. Many projects were stalled for a long time during the year 2011 because of the acquisition disputes and other clearance related problems. As a result, banks were quite averse about funding the property purchase in these areas. So, the location of the property also affects your loan application.
Besides these factors, the age bracket of loan sanctioning by the banks should also be considered. Usually the minimum limit is 23-25 years and the maximum is 60-65 years. You need to make sure that you fall in this bracket. Being a little thoughtful will help you avoid the rejection of your home loan.
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