Home Loan Application Rejected? Know the Reasons

Buying a house, whether for investment purposes or as a residence is one of the most crucial financial decisions in everyone’s life. However, managing the finance to buy a house could be difficult at times. In such cases, people prefer applying for a home loan. A home loan is a type of loan that helps borrowers to purchase a house with the promise to return the amount with an added interest rate. As these loans are sanctioned for tenure as long as 30 years, lenders go through the profile of the borrower thoroughly. 

And since the policies, eligibility, and verification process are too strict, some borrowers face the problem of getting their home loan application rejected. There are plenty of reasons why a home loan application form is rejected. However, there is not any reason for you to panic regarding this. There are some measures that you can take to avoid such a nuisance in the first place. 

Read on to learn about the reasons for which your home loan application is rejected and some steps on how to prevent it. 

Why is a home loan application rejected? 

When talking of the reasons for which it is rejected, you must learn the simple notion that lenders need to trust your repaying capacity. If anything in your profile makes the lender suspicious, there are chances that your home loan application will be rejected. Here are some reasons why a loan application form for a home loan is rejected. 

1. Poor credit score:

Be it any type of loan, a credit score plays a huge role in deciding your creditworthiness to the lender. Poor credit score often is a turn-off for lenders and could be a big reason why your home loan application is rejected in the first place. This possesses a lot of questions regarding your credibility and decreases the lender’s confidence.

2. Inconsistent employment:

You might consider changing jobs for better prospects, financial security, or some personal reasons. However, changing jobs very frequently creates a sense of uncertainty about your loan repaying ability to the lenders. This is a big reason why many borrowers could not get their loans processed. 

3. Issues in your credit report:

Even if your credit score is super to the mark and you might have the desired creditworthiness, if there are errors in your credit report, then your home loan application is going to change. If your credit report is not rectified, then your loan application form will be rejected and you will be debarred from getting the home loan amount. 

4. Incomplete Document:

As mentioned earlier, most home loans have strict policies and verification. As a home loan is granted based on documentation, you need to submit all the legal documents. If the documentation is incomplete, then there is no doubt that your home loan application is going to be rejected. 

5. Indebtedness: 

If you have a high level of debt pending, then it again questions your repaying capacity. So, as a result, lenders might not be willing to burden your financial situation more by attaching another loan. So, this is also a reason why your home loan application form got rejected in the first place. 

6. Issues with the chosen property:

Sometimes, the reason for your home loan application to get rejected is because of the issues with the property you have chosen. There could be some legal issues or sometimes the property could be too old as well. If the property you are looking for is too old and shabby, lenders might not allow you to get a home loan. 

Besides this, there are some other associated reasons for your home loan application to get rejected like not having a ‘No Dues Certificate “from your previous lender, old age, poor employer profile, etc. 

How to prevent your home loan application from getting rejected? 

There are many ways through which you can prevent your home loan application form from getting rejected. They are:

1. Improving your credit score:

As credit score plays a huge role in deciding your creditworthiness, you should make sure that you have a decent level to apply for a home loan. Most lending institutions look for a credit score that is 750 or more. 

2. Maintaining job consistency:

To prevent your home loan application from getting rejected, you should make sure that you maintain job consistency. Even if you change a job, make sure that you don’t do it frequently, so that your loan credentials are not affected. 

3. Rectify your credit report:

Having errors in your credit report affects your loan sanctioning process. So, you should consider this and rectify the errors that are present in your credit report. 

4. Proper documentation:

Since documents predominantly decide whether or not the loan is to be sanctioned, you must keep all your legal papers in order with you. Doing this properly, helps you avoid the chances of getting your home loan application rejected. 

5. Ensuring no issues with the property:

Before applying for a home loan, make sure that you have no issues with the property for which you are about to take the loan. 

6. Know the eligibility criteria properly:

Before you stumble upon applying for a home loan, make sure that you know about the eligibility properly. You can do that through self-research or contacting a bank professional or both. 

Summing it up

While applying for a home loan is a big financial decision, knowing about certain points before going for it is important. As a home loan application might get rejected because of the strict policies and processes, you should focus on the above-mentioned points to prevent that from happening. Out of all the points, if you meet the eligibility and have a decent credit score, a lot of problem gets sorted out then and there. In case you want to know more about the home loan application process, you must visit Piramal Finance.