Let’s face it. Most of us cannot buy a home without availing a home loan. Depending on our finances, we might be able to reduce the tenure or loan amount, but it is impossible to otherwise afford a home in this era of rising real estate prices. When our dreams ride on securing a home loan, a home loan rejection is a huge setback.
Here are some conditions that could tip your scale when it comes to applying for a home loan.
What does CIBIL have to say about your credit score?
The Credit Information Bureau India Limited (CIBIL) is a credit information company that maintains records of all credits including loans and credit cards. Even if you have a CIBIL score of 700, which is considered good in most cases, banks will be happier with those who have a credit score of 800-900. The numbers alone do not guarantee loan approval. CIBIL issues remarks when short-term EMIs are replaced with long-term EMIs. Banks consider these remarks well. CIBIL also issues remarks when loan repayments go past the due date.
Over-leveraged?
Banks could reject your loan application if they think you are over-leveraged. Being termed over-leveraged is a possibility if you have many loans in your name (present or past loans), in spite of having a good salary, assets and a good repayment history.
How good is your guarantor?
Have someone as a guarantor for your home loan application? Banks check the repayment background of guarantors as well. If your loan guarantor’s CIBIL score is bad or has a history of defaulting, the chances are your loan application will be rejected.
Is your builder reputed?
Although this is certainly not on you, it weighs heavy on your loan application, as the risks are far greater. If your builder is relatively unknown or is known for delays and building malpractices, banks will reject your loan application. It is always better to research well about the project and the builder before you plan to invest in that property.
Banks also reject loans if they are not funding a particular project developed by the builder. Did you know that even if you get a loan sanctioned, it could get cancelled if the bank is not funding flats on a particular floor? Shocking isn’t it?
Has your builder exceeded his exposure limit?
Banks limit the amount you can borrow – this maximum amount is termed as an exposure limit. Banks also issue exposure limits to builders. A particular project by a certain builder might be eligible for certain amount of loan only. If you choose to apply for a loan amount higher than the exposure limit of the builder, your loan will be rejected.
Have you always obeyed the taxman?
For any home loan application, you will need to submit minimum 2 years IT returns to the bank. However, banks find it better if you have a longer tax repayment history. This helps them gauge your capability to repay a long-term loan.
There are many conditions that can make or break your home loan application. Being well-informed and prepared will help you secure your home loan without any challenges.