Builder/Property not approved – If the builder or the property in which you want to buy a house does not meet the requirements of the lender, the home loan can get rejected. Reasons like builder not following necessary guidelines or the property being in some dispute or being old can lead to rejection of home loan.
If the address of the property is in the defaulters' list due to illegal activities or no clean titles, then the home loan application can get rejected.
Previous Loan Records – If you have many outstanding loans or have missed monthly instalments, your application may not be accepted. If your credit score is low, your application will not be accepted.
High FOIR, Financial Eligibility – FOIR stands for Fixed obligations to income ratio. It is the ratio of your total loans (including the home loan applied for) to your total income. Most lenders prefer the ratio to be within 40–50%. If you have more loans that that, your application could be rejected. Your earning capacity would also be checked. If you have been switching jobs too often or have long tenure of unemployment in recent times, your application can be rejected.
Co-applicant's track record – If you have a co-applicant for the home loan who has a bad credit score or has defaulted on loans, then the home loan application can get rejected.
Incomplete Documentation – If you do not have relevant salary slips, IT returns documents and 'No dues' certificate from previous lenders, your application may not be accepted.
Let us look at some steps to take that can ensure that the home loan application gets accepted -
- Close other major outstanding loans that you have so that the FOIR is within limits.
- Ensure you meet eligibility criteria such as age, income, CIBIL score, property etc.
- Check if your CIBIL score is good. Make sure your tax returns are filed on time. Pay your credit card dues on time.
- Do not be a guarantor for borrowers who have a risk of defaulting on their payments. If they default on payment, you will have to settle the dues else your credit history will get affected. Your eligibility to get a bigger loan will also be affected if you are guaranteeing others' loans.
- Be ready with all documents required to apply for a home loan.
- Do not change jobs frequently and make sure you have a regular income before applying for a home loan.
Do remember, that it is not the end of the world if your home loan application is rejected. You might have to wait for some time before reapplying and analysing the reasons for rejection and rectifying them. But of course, if you follow the process properly you can get the loan approved in the first go and acquire your dream house.