Home loan rejection reasons by lenders or banks can vary widely, but some top reasons are:
Banks and lenders such as Bajaj Finserv look at the credit history and records of a potential borrower of home loan. In the credit history, they basically check the EMI’s of other loans and whether there have been timely payments. To avoid this condition, it is essential never to miss deadlines on EMIs and credit card dues, and be punctual with all payments. It is necessary to keep a watch on the credit record always, simply by being aware of repayment dues and bills.
Age of Applicant:
If the applicant is close to retirement, his/her home loan application may be rejected. Lenders are usually hesitant of offering loans to such applicants, as they assess the applicant may have limited or zero repayment capacity. However, there can be an offer of short-term home loans from some banks. However, short-term loans involving big amounts will result in very high EMIs, and this will certainly take away the comfort of availing the home loan in the first place. Therefore, the age of an applicant has a very important role to play in home loan rejection reasons.
Address on Defaulter List:
The applicant may have moved to an address that was earlier rented by someone who did not clear a loan or a high credit card bill. If the previous tenant or owner has given the address in the bank records, the bank will list the address in the database of defaulters. This can decrease the possibility of home loan approval for the present owner or tenant.
If the applicant has changed too many jobs, it can reflect poorly on his application for home loan. One of the main criteria for banks to approve a loan for buying a home is job stability. To be eligible for a home loan, banks prefer applicants who are employed in a particular company or firm for three consecutive years. Even if the company employing the applicant is reputed, the bank may reserve its right to reject the loan, if the company seems unstable.
For getting a home loan approved, the applicant must have a high CIBIL Score for Home Loan. Therefore, the applicant must ensure he or she has a credit score that is 750 or above when they apply for a loan. CIBIL (Credit Reports and Risk Management Solutions) records credit scores of individuals.
Loan Guarantor to a Defaulter:
If the applicant is a loan guarantor to a defaulter, it can be risky for the applicant. No one should agree to be a loan guarantor, unless sure of the repayment capacity of the borrower. No one should sign to be a guarantor unless there are strong reasons to believe in the borrower. In case of a default in repayment by the borrower, banks will hold the loan guarantor as responsible for repaying the loan.
Suitable Property as Security:
Banks and lenders require securities for approving a home loan, but they do not accept all types of residential properties as security. They prefer properties with a good resale value and stable price, as these are easy to sell. Therefore, when offering a property as security, the applicant must ensure they are not offering something too old. They must also ensure a reputed and trusted builder has constructed the property. They also need to make sure all required documents related to the property are easily available, to avoid the home loan from being rejected.
Apart from the above, if the property has issues related to its layout or title, this could be one of the home loan rejection reasons.
Rejected Loan Applications:
CIBIL also records incidents of loan application rejections. Such incidents become a part of an applicant’s credit record. Therefore, the applicant must check their credit score at one bank before they apply to another. This allows the applicant to correct their mistakes and make sure there are no reasons for rejection of loan application because of a similar mistake while applying the next time.
Filing Income Tax Returns:
Filing the income tax return is essential every financial year, even if the employer has not given the Form 16. Before approving a home loan, banks and lenders check if the applicant has a clear track record of filing income tax returns for the last two years.
Non-availability on Landline:
If the applicant has filled in their landline number in their home loan application form, the bank will call the number for verification purposes, When the bank calls and the applicant is away at work or busy elsewhere, the bank will consider it as a case of ‘no response’. Therefore, the candidate should preferably provide their mobile number in their application form.
While applying for a home loan, the applicant will have to sign several documents. It is necessary the signatures in all documents match. Not only should the signatures on the home loan application match those on the document copies, they should also match the signature of the applicant in the records of the bank.
Applicant is an Entrepreneur:
Banks and lenders approve loans readily for entrepreneurs who are reputed and stable. However, those just starting out may have low capital and an uncertain future, and banks may not approve their loan applications easily. The only option in such cases for the applicant is to ensure the bank of their business’s stability and growth by providing some testimony.
Property with Minority Rights:
The bank may reject the loan application for a property with minority rights. That means if the seller has not disclosed the information that a minor has rights on the property, the bank is likely to reject the application.
Applicant is a Fresher:
Banks and lenders prefer applicants who have a stable job in a company, where they are working for at least one year. Banks usually determine the stability and repayment capacity of the applicant by assessing the number of years of employment. Therefore, banks may not prefer freshers as an option when approving home loans. Moreover, applicants with frequent job changes may also face rejections for the same reasons.
No NOC on an Earlier Loan:
Essentially, the applicant should have an NOC (No Objection Certificate) on any earlier loan they have closed. Not providing an NOC on an old loan that is closed, can lead to banks or lenders rejecting a home loan application.
Non-payment of Telephone Bills:
If the applicant has unpaid telephone bills, this may lead to their home application being rejected. Bank and lenders prefer timely payment of all bills and do not like unpaid bills.
Getting a home loan sanctioned is not easy as the list of home loan rejection reasons is huge. Therefore, the applicant has to be very sure of all records such as credit score for home loan being clear. Often, securing the home loan that the applicant is looking for stands a better chance by providing additional security such as collaterals, fixed deposits, insurance policies, or a guarantor. This helps to avoid reasons for rejection of loan application.
Also Read: Know about Home Loan Process