Owning a home is one of the biggest aspirations for many of us. Real estate is a fixed asset, often lasting a lifetime. And has a proportionate cost. It is nearly impossible for the common man to own a home without availing a home loan.
But what if your home loan application gets rejected? Should you stop aspiring for a home? No, you need not worry because you can set things right and reapply.
Before you start getting your act together for a loan reapplication, it is good to know the reasons why your loan could have been rejected and how to work on getting each of them right.
Here are some simple pointers that you can keep in mind before reapplying for the home loan.
Low credit score
Home loans are big-ticket and long-term in nature. Hence, no lender would like to lend to a person with a poor credit score. A lender can gauge the creditworthiness of a borrower first with a credit score. Therefore, before you apply for any credit, it is good to have a look at your credit score and credit report. In the case where your credit score turns out to be low, work on improving it before you apply for a home loan.
You can get your credit score and credit report from any of the credit bureaus or many of the fintech companies like Credit Mantri, PaisaBazaar or BankBazaar.
Unstable employment
If you have changed jobs quite frequently, it is very likely that this factor may have a bearing on your loan application. Stable employment with a good company is seen as a positive factor. So, if you have been in the current job for only a short time, give some more time before you reapply for the home loan.
High loan amount
Owning a home is a one-time investment, and very often, an emotional investment. The emotional aspect of buying a house might have us overlook the financial cost.
Depending on your current take-home income, each lender sets the maximum amount you could borrow. The rejected amount might have been higher than your eligible amount.
You can choose to lower your loan amount by increasing your down payment or reducing your home buying budget.
Many existing loans
If you already have a number of existing loans, a portion of your income goes towards servicing those loans.
Banks allow a maximum of 40% of your income to go towards servicing of your loans. A home loan EMI is a big one, so if you already have many existing loans, it is good to wait till you clear some of them.
Improper documentation
Home loans are big-ticket loans involving a lot of documentation. It includes salary /income papers, income tax returns, bank account statements, address and identity proof, legal documents of the property, permits, and approvals from appropriate authorities.
If even one of these documents is not in order, it can lead to your loan application being rejected.
A representative of the lender should be able to help you with the right documentation.
Consider adding a co-applicant
Adding a co-applicant adds to the value of your loan application. Combined incomes enable you to get a higher loan if your income doesn’t make the cut. Also, a good credit score from your co-applicant might help if your own credit score is a tad low.
Once you know the reason for your home loan application rejection, it is not a difficult task to rectify and resubmit.