The lenders of home loan process the request to sanction a loan on the basis of a certain criteria. Primarily it includes credit score and steady income. But there are other factors too affecting the approval of a home loan. The lenders do a lot of research before they approve the home loan. You might be unaware of many formalities and paper work that you have to go through. Be loan ready but also know about the possible reasons of rejections.
The following might impact home loan approval:
- Credit rating- The borrower should have a good credit score. Timely payment of dues and EMIs of other loans affect your credit rating. Always be punctual with payments and do not miss the deadlines on credit card dues and EMIs. There could be other debt obligations too. The lender may refuse to offer you a home loan if your repayment capacity seems inadequate in their eyes. Sometimes unpaid telephone bills are enough to trigger the lenders.
- Previous record of loan application rejections: CIBIL records the incidents where a loan has been rejected. So when a particular bank rejects the request, the others will follow because of such records kept by CIBIL.
- Job stability-Frequent changes in jobs shows poorly on the home loan application. Preferably the borrower should be employed in a particular firm or company for three years. If the company where the borrower is employed looks unstable, the bank might reject the loan.
- Failure to file Income tax returns-One should have a clear record of filing the ITR of the last two years before going to get a home loan approval.
- Mismatched signature-Please be aware of the fact that the signature that you use should be the same in all the documents pertaining to the loan. The signature on the underlying documents and the one used with the registered bank should match.
- Property’s age- The loan is sanctioned by holding your property as collateral. The age of the property matters. If it is too old, the lenders think about its structural vulnerability. There could be other technical and legal issues involved. If the property faces any government rules surrounding its area, then it is difficult to sanction a loan accepting it as collateral.
- Low valuation of property-The banks do valuation of the property. Age, location and condition of the property are taken into consideration along with the quality of its construction. Usually the loan approval is up to 85% of the value of property done by the banks irrespective of its market value. The bank may curtail the amount of loan because of the lower value it assigns to the property.
- Age of the borrower and remaining years of service: The younger the borrower-the more the number of years of service left and more is the security of getting the loan repaid. The loan amount should not be more than half your monthly income. There are limits put against the acceptable EMIs too. Considering this criteria if the EMI is higher, there are higher chances of rejection.
When you approach the bank to get a loan at an older age, the tenor of the loan will get shorter as the retirement age will be a few years ahead.
- Property/borrower being unapproved: The property should be approved by the local authorities. The banks or the HFCs go through the details of the project to check for the approval of the property by the local authorities. In the same way the builder too should be an approved one. If the builder’s name appears in the black list, the loan will not get approved.
- Being an entrepreneur- The established and reputed entrepreneurs get the home loan easily as compared to the new ones with a low capital. The bank should be convinced about your growth and stability as a business person.
- Being a fresher in your job-Similarly the applicants who have just started their jobs are less preferable. Bank looks at job stability, stable income and repayment capacity.
Bhoi Smrutirekha Dharanidhar