Purchasing a home is one of the largest financial decisions we will make in our lives. The dream of turning into a home owner may be fulfilled with th
Purchasing a home is one of the largest financial decisions we will make in our lives. The dream of turning into a home owner may be fulfilled with the assistance of a home loan. Even before you finalize your dream home, you need to conduct research on the special features of lenders (banks and housing finance companies), the interest costs and types (fixed or floating interest rate), and so on. The home loan is an important loan that may last for over 2 decades or more. So you need to additionally take all of the precautions to make sure your home loan isn’t always rejected. Here are common reasons for home loan rejection which you ought to be conscious of, in case you intend to take a home loan.
Home Loan Rejection Reasons
Borrower’s age at the time of the application
There are primary factors why a home loan application gets rejected; if the borrower is freshly hired or if his age is near retirement, while he applies for the home loan in India. Lenders are often hesitant to approve loans for such people given that they can’t correctly determine the borrower’s repayment potential. While a fresher generally has a lower income, a man or woman who’s near retirement might not have the potential to pay off the loan, while his source of income diminishes.
As we cited above, home loans typically last for lengthy tenures. It comes with lengthy–time period responsibility. Frequent job changes, with intervals of unemployment, can have an effect on your home loan eligibility. You need to be employed for a minimum, continuous duration of 3 years with the current employer for your home loan to be approved. If you’re employed for a longer duration of time, the lender has the assurance that you have the repayment ability to repay the loan within the stipulated tenure.
Low Credit Scores
Lenders these days ask on your credit score report even before you could apply for the loan. Lenders can check your credit history and worthiness with the assistance of your credit score rating. You want a healthy credit score rating of over 750 on your loan to be considered. Your credit scores are affected in case you default on paying your credit card payments or your present loan EMIs. These elements can illustrate to the lender that your credit repayment behavior isn’t ideal.
Low loan-to-income ratio
Another common reason for house loan denial is a low loan-to-income ratio. You must advise your lender of any other loans you have taken, such as a car loan, a motorcycle loan, a personal loan, and so on. This aids the lender in determining your loan-to-income ratio. You should not borrow more than 50% of your monthly income in total loans, including the home loans if granted. If your loan-to-income ratio is greater than half of your monthly salary, lenders are likely to reject your application. However, you can apply for a home loan as a joint loan and have it accepted by including your family income (income from your husband and children).
Failure to file income tax returns
It is critical to file your income tax returns on a year-by-year basis, since this could be a major factor for house loan rejection. Even if your employer does not offer Form-16, you must file your taxes. Before approving your house loan, lenders look over your tax filing data for the previous three years.
Accurate documentation is a crucial element of the approval process; without it, your housing loan application may be denied. You must submit all of the required documents listed on the application form. If you don’t, your home loan application will be rejected. Also, make sure you don’t give any fake information, as this could lower your acceptance rate.