Top Reasons For Home Loan Rejection

In India, the one thing everyone dreams of having is their own house as paying an EMI is more fruitful compared to paying a rent every month. But increasing real estate prices has made buying a home for a middle class family very difficult and one requires lot of support from the bank in the form of home loan. We all believe that getting a home or personal loan is hassle free but when the person approaches bank, the home loan application gets rejected which leaves a person in a very difficult situation.

Top reasons for home loan rejection by the banks are as follow

Credit History:

Among the top reasons for home loan rejection, the first and most important is the person credit history or more commonly CIBIL score is the most common reason for home loan rejection. Your credit history is the most important factor during loan application and if found poor; either because of credit card payment or personal loan repayment then chances of loan denial increases. These days banks and financial institutions in co-ordination of CIBIL pay special attention on each application. Ideally a CIBIL score of more than 700 is considered good.

Personal Profile:

Among the top reasons for home loan rejection, the second most important reason is person’s profile which consists of education, profession, savings, insurance policy amongst many other things. If number of dependants on loan buyers are more and the person has already taken higher amount loan then banks become defensive in allocating the loan assuming that repayment of loan would be difficult for the person since he already has other financial obligations. Also, banks don’t sanction a loan amount which results in EMI being more than 50% of your in-hand salary.

Title Deed and NOC Documents:

Among the top reasons for home loan rejection, title deed (a document specifying the ownership of the property which mentions specific rights to the person holding it) and NOC documents should be presented in a clear way with no misrepresentation. Person who applies for the loan and fails to show result in loan disapproval. Also, banks verify the ownership rights with the registrar and in case they find anything suspicious they don’t disburse the loan. So, beware if your loan is rejected by bank on account of ownership issues you should avoid that property deal all together. e

Persons’ Age:

Among the top reasons for home loan rejection, If person’s age is higher or is approaching retirement or is retired then chances of getting a loan become less or loan term is reduced. But this reduction in loan term results in higher EMI’s from the bank offering loan which in turn affects repayment. Ex, if you are 30 yrs of age you can easily get loan for 30 yrs and higher loan amount due to lower EMIs. But, if you are at 50 yrs you will get max loan tenure of 10 yrs which results in higher EMIs and lower loan amount.

Area Black Listed:

Among the top reasons for home loan rejection, Applications are straight away rejected or the approval procedure becomes cumbersome if the housing area is black listed by the banks. Almost all the banks have list of blacklisted areas these days, so do check with them. These areas are listed black because there are no government approvals or clear ownership rights so you should avoid it all together.

Financial Condition:

Among the top reasons for home loan rejection, another most important reason is person financial condition. Home loan amount depends on your annual income. Before approval, banks calculate where the person would be able to pay the EMI based on the income. Permanent salaried or individuals who do not switch job too often get loans with minimal efforts. In addition to this, if the person has sufficient money in the bank account then also the approval chances are higher. On the other hand frequent job hoppers or person with too many dependants find it difficult in getting a home loan.

The above listed Top Reasons For Home Loan Rejection will help you understand why your home loan application got rejected as well as prepare you pre-hand to avoid home loan rejection by the bank. Also, read about home loan charges you should know about.

Please visit our finance tips section on our website for more articles around financial planning.

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