Six reasons for home loan rejection

Time to read: 3 mins | April 23, 2016

You have done everything right, but you are still left analysing the outcome of your loan application.  Having your loan rejected is the most frustrating feeling, especially if you are in dire need of one. Before you jump into the next bank to apply for one, make sure you have all your bases covered.

When you apply for a home loan, the bank has every right to accept or reject the same. In case your loan is rejected, your bank may or may not tell you the exact reason. While you cannot demand answers or explanations from them, you should definitely be aware of situations where your application is rejected.

Some of them are listed below.

• Credit score

More often than not, a low credit score is the prime reason for your home loan getting rejected. Even one missed credit card payment or payment mismatch in income can be the reason for rejection. As your income is not considered by CIBIL, it’s not taken into consideration while determining your creditworthiness.

• Repaying capacity

When you are requesting for a loan, a representative of the bank does a background check on your income to ascertain if you are capable enough to repay it. However, if your loan amount is beyond your repayment capacity, then there are chances your home loan will get rejected. upfront.

• Documentation

Submitting proper documentation, evidence and paperwork is the prerequisite for any loan, more importantly a home loan (due to the enormity of the amount involved). If your papers are incomplete or if you have submitted false information or if your signatures don’t match on the papers, your application will not be processed further.

• Lack of income

If you lose/quit your job midway during your loan application process, your bank comes to know of the same through background checks. Since you have lost your repaying capacity, your loan gets rejected, even though it passed the initial approval stages.

• Existing loans

If you apply for a home loan, when you are already deb-ridden with previous loans, the bank has the right to reject your loan on the grounds of your liabilities being higher than your income. The bank has the right to think that your leftover income (after honouring all existing commitments) wouldn’t be enough to meet the EMI for the home loan that you have requested.

• Does not fit the bank’s policy

Sometimes the internal policy of the bank may find fault in the area of construction or the credit profiles are negative and may not sanction the loan. If this is the case, then it is good option to talk to the bank officials and find a way around it- through collaterals and guarantors. Also, sometimes banks don’t fund buildings which are 20 years and older. 

Hence, it is important to check all areas and take into consideration the banks viewpoint before jumping banks to get a loan to ensure your loan is accepted and can begin living your dream.