When you approach any lender to get a home loan, they typically request two things for approval. These are your credit profile, including your credit score and your income. Both these factors must meet the lender’s expectations to get you approval for a home loan, otherwise your application will be rejected. Other things that issuers of loans view are stability of income and records of your financial health. Lenders want assurances that you are financially sound before disbursing funds. Nationality, age, educational qualifications may also play a role in determining loan approval. If your application contains certain inaccuracies, such as in your name, age, address, etc, lenders have cause to reject it.
Factors for Loan Rejection/Approval
The key reason to reject a home loan application comes from borrowers not displaying a degree of creditworthiness. Creditworthiness is an indication of your credit history. If you apply for a home loan, EMI tenure, interest charges, the loan amount granted, and other aspects of the loan are dependent on credit scores. Usually, banks and other lenders check your details thoroughly before approving a home loan, which amounts to a large sum borrowed. Taking a home loan requires a lot of planning on your part too. You should research lenders well and calculate how much home loans will cost. At Finserv MARKETS, you can use a loan calculator to estimate the cost of your loan in terms of interest charges, etc. Although credit score is the major factor that lenders base loan approval on, there are other lesser-known ones that you should know about.
What are the Lesser Known Reasons for Home Loan Rejection?
Here are less obvious factors that are considered by some lenders while approving your loan:
- Property Value – If the property you are looking to buy has a low value attached, lenders may see fit to reject your home loan application. In typical circumstances, banks offer up to 85% of the value of the property as the loan amount. However, irrespective of what the market value is, banks undertake their own valuation process.
- Service Years Left/Age – Your eligibility to get a home loan and loan tenure are related. Obviously, if you are a young applicant, you have more years to repay your loan, and can choose a longer tenure for repayment. In the case of a home loan EMI will be lower if it’s to be paid over a longer tenure. In the context of this, you get approval more easily than if you were older with a few years of working life left. Consequently, your EMIs would be higher and if they’re not at the expected threshold of lenders, your application gets rejected.
- Unauthorized Property – Lenders check if the property you are taking a loan for has the necessary approvals by local bodies. If it doesn’t, your loan application will be rejected.
Summary of Thoughts
Taking a home loan is an easy process, provided you meet the criteria of your lender. You can select from a host of lenders at the Finserv MARKETS portal, including Bajaj Finance, and estimate your eligibility for loans up to Rs. 3.5 crores.