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What are the 7 most common reasons for home loan rejection?
Buying a home of your own is the most exciting feeling in the world but at the same time, it involves a significant amount of your time and energy. Similar is the case with home loans. You have to search for the right lender that suits your needs in terms of good service, the amount that can be sanctioned, and so on. In this process, the fear of home loan rejection is strong.
To get a home loan approved as early as possible for your sweet home, you should go by the procedure and follow everything carefully. These just don’t include formalities of the application process and so on which are required at the moment but you have to be careful with your overall finances for at least the recent past of 3-4 years. This will help you with a smooth loan sanctioning process. Let’s have a look at the most common reasons why home loans can be rejected:
1. Missed Payments
Missed payments impact your credit history. So, lenders access your repayment history, bank statements, financial delinquency, and other financial documents to check for your past finances and then have an idea of your creditworthiness. With missed payments, be it EMIs on other loans or credit cards, it can be difficult for you to get your home loan approved. So, to avoid loan rejection, keep all your financial payments on time.
2. Your age and job stability
Lenders have a minimum and maximum age limit to be eligible for a home loan application. They also look at your profession, salary, how frequently you have changed your job, and so on. The basic information such as age eligibility can be found on the lender’s website. So, in order to get an easy home loan approval, you must first check these basic eligibility criteria such as age, income, and so on. One of the common problems that can come your way is when you are near the upper age limit, the lender might not proceed with the loan application.
Even in case they do that, the loan amount would be less. Even your frequent job switching can put a wrong impression in the minds of the lender. This is because they see the financial stability of the person before retirement only. So, you are suggested to keep these things right in order to avoid rejection for home loan approval.
3. Low CIBIL Score
If you don’t have a good credit score, you are more likely to face difficulties in getting a home loan issued. This is because a low credit score will indicate low financial credibility. A low CIBIL score arises due to pending EMIs, missed card payments and so on. This might not matter to you at that particular time but a low credit score affects approval chances for all future loans. Apart from that, a good CIBIL score will also help you with better negotiation on interest rates.
4. You are a loan guarantor to a defaulter
If you have ever been a loan guarantor to any of your friends or known, there might be a chance that they have defaulted on their loan. This can be a problem in your own loan sanctioning.
5. Issue with the property
The property itself can be a reason for loan rejection. Lenders assess the property’s condition, market value, location, and legal status. Issues such as property encumbrances, disputes, or poor conditions may make it difficult for lenders to approve the loan. Additionally, if the property does not meet the lender’s criteria, such as being ineligible for mortgage insurance, it can lead to rejection.
6. Incomplete documentation
The majority of a home loan’s approval depends on the documents you submit. If the required mortgage documents are incorrect or insufficient, the lender may deny your loan application. Therefore, it is essential for petitioners to provide all required documentation when submitting the application for a home loan.
7. Inadequate Down Payment
Lenders typically require a down payment as a percentage of the property’s value. If you fail to meet the required down payment amount, it can result in a loan rejection. Insufficient funds for the down payment may indicate financial instability and an increased risk for lenders.
HomeFirst is a lender that promises a quick disbursal of the home loan along with an online process of application. If you follow these points and maintain an overall good record, the home loan approval process will become easy for you as well as the lender.
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