What happens when a well employed
person applies for a loan to fund his dream home and the same gets rejected? It
is not only highly disappointing but frustrating too that despite the fact that
you met all the criteria and are capable of repaying the loan amount at the
right time, your application was rejected. We need to investigate the reasons
for such rejections and try to avoid them.
Reasons for Rejection of Home Loan
Apart from the loan applicant not
meeting the bank’s requirements for a loan seeker, there are several other
reasons that could result in the rejection of a loan application.
- Unapproved Builder: One of the primary reasons for rejection might be that the builder chosen by you is not approved by the particular bank. It is always advisable to check with the builder about the banks that have approved their projects for lending. This will ensure quick and hassle free clearance of your application.
- Unapproved Project: In this case, the builder may be approved but a specific project may not be approved by the concerned bank. In some cases, certain segments or phases of a project may not be approved by the bank as yet. Such situations may lead to rejection of your application, so it is important to check that the project and the phase in which you wish to buy your dream home is approved for loan purposes by the bank concerned.
- Dispute Over Valuation of Property: The bank may reject an application if the valuation done by its experts differs from the price decided by the buyer and the seller.
- Credit History: Although the current financial position of an applicant may be good, his/her previous credit record plays a important role in helping the bank decide about their finances. The lender will always check your credit record and take note of any delays or defaults by you in paying your EMIs, credit card bills or installments on other loans. So, it is essential that you maintain a good credit record if you wish to avoid rejection.
- Your Address: In case somebody with a bad or poor credit resided at the address in which you live in at present and the same is included in the list of defaulters for a particular bank, your application could be rejected.
- Previous Loan Rejections: These are never ignored. So, it better to apply home loan to one bank, check the reason for rejection, correct the mistake and then apply again.
- Income Tax Returns: You need to have an updated tax filing record because banks prefer to see the income tax returns of the past two years before approving any application.
Apart from these reasons, banks can
also reject loan applications on the basis of mismatched signature, wherein
your signature on the loan application differs from the one on other attached
documents. Other points considered by a bank for approval or rejection include
the age of the applicant, his work experience, educational qualifications,
dependent members, number of co-owners in the property to be funded, etc. So, first
check with the lender of your choice for their eligibility criteria and ensure
that you fulfill them all before applying because rejections also create a poor
loan history for you.
