Home Loan Rejection: Reasons Lenders Will Not Tell You
Till a few years back, people used to wait until their retirement to purchase a home. But the scenario has been changed. The home financings have much simplified the home buying process. It is the home loan only which has made the dream of home buying true for many of us.
A home loan is a credit of a quite big amount and generally runs more than a decade. As the loan is of a high amount and the NPAs are increasing every year, the lenders nowadays follow a stringent approval process to assess the repayment capacity of borrowers, which often leads to rejection of the loan applications. Because of those issues, many a time, it may happen that, you don’t even get a clue why your loan application got rejected.
Here We Unveil Some More Reasons for Home Loan Rejection
The age of the loan applicant while applying for the loan makes its impact while taking the approval decision by the lender. If the loan applicant is less than 21 years or near to his retirement age, the lenders hesitate to grant a loan application. A home loan cannot be continued after the age of 60. Hence, if you apply for a loan at the age of 55, the maximum tenure you can get is of 5 years. Such scenarios are one of the reasons for rejection of loan application.
Address in Defaulters List
The address from which you are applying for a loan can also turn to be a reason of loan rejection. In some most unfortunate cases, it may happen that any of the former residents of your present address has defaulted the loan. In such situations, the credit bureau keeps the address in the defaulters’ list. If you apply for a home loan from the same address, your loan is likely to be rejected.
If you are an employed person, your job employment history is also checked by the lender. If the lender finds that you have a habit of changing job frequently, your loan application can be rejected. Such behavior of yours is an indication of instability within you. The lenders check for the minimum of two years of employment with the present lender.
The FOIR stands for Fixed-Obligation-to-Income ratio which is a parameter to calculate your loan eligibility. It is a ratio between the take-home salary to the total payable of yours including the applied loan. If the ratio is more than 50, your loan application can get rejected even if you earn well and own an excellent credit score.
The Bad Credit History of Your Co-Borrower
Sometimes your co-borrower can become the reason of your loan rejection. If the co-owner of your home loan has an extremely bad credit score or he/she has ever defaulted a loan, your loan application can be turned down. When you apply for a joint loan, both the co-applicants income, credit history, and FOIR are checked. If any of the applicants cannot qualify the eligibility criteria, the loan application may get rejected.
Several Applications at a Time
Some of the home loan aspirants’ wrong financial behavior can even make a loan application get rejected. Some home loan seekers are so very desperate to take a loan that they apply for a home loan to several lenders at the same time hoping that one or another application will be sanctioned. But such behaviors can prove to be devastating as credit bureaus keep a record of all loan-related activities of yours. When a lender will get to know that you have applied for the same loan with other lenders too, your loan application will be rejected. In the same way, all your loan applications will be rejected which will be resulted in crushing your credit score in a massive way. After such damage of credit score, it will take a minimum of a year to rebuild your credit score and avail a successful home loan.
Previous Loan Rejections
This reason of home loan rejection is similar to the previous one. If your credit report reflects that your previous loan application was rejected, the new lender also becomes suspicious on your creditworthiness. They turn to be more stringent which can sometimes turn to be a loan rejection too.
The Absence of ITR
Whatever your income may be, filing ITR is a must for all of us. If you have made a mistake of not filing the ITR in previous years, this can be another reason for declining your loan application by the lender. The home loan lender asks for a minimum of last two years ITR filled forms.
Not Complete Set of Document
As the home loan is a secured loan, you must provide the complete set of property documents as well as your personal documents to the lender. The list of document needed for a home loan is a huge one. If any of the documents are missing or you are found incapable of furnishing a particular document, your loan application is likely to be rejected.
Some other times it may happen that you are eligible for a home loan but the property which you have chosen is not eligible for it. This fact may be surprising for many home loan aspirant but it is true that because of the property some home loan applications get rejected. There can be several issues with the property such as legal issues, issues regarding the property location, the age of the property, the builder of the property etc. In such cases, the property is declared as ‘property no suitable’ and hence the loan application has been rejected.