Top five home loan rejection reasons: The lenders evaluate home loan applications using several factors.
Should the applicant fail any one of the qualifying criteria, the application might not be approved.
Common reasons for home loan rejection:
Poor Credit Score: Reason for Rejection of Home Loan
There is a numerical representation of an individual’s creditworthiness that is known as their credit score.
It indicates how an individual has handled their debt in the past.
It is generally accepted that credit scores of 700 or higher suggest a disciplined approach to financial behavior and a reduced likelihood of defaulting on loans.
The result of this is that the lenders will use the applicant’s credit score as one of the first filters when evaluating someone for a home loan.
When it comes to determining interest rates, many lenders take into consideration the credit scores of the individuals who are applying for house loans. This is done as part of the risk-based pricing strategy.
Higher credit score applicants have more chances of loan approval and at progressively lower interest rates.
Those with poor credit scores risk loan rejection or pay higher interest rates to offset the higher credit risk connected with such applicants.
Tips: It is important to ensure that you pay your credit card bills and installment payments on time.
To get further information, it is recommended that you obtain a free copy of your credit report on an annual basis from a credit agency or an online financial community.
Should you discover any errors or inaccurate information, it is advisable to alert the company or the bureaus to facilitate the necessary corrections.
Correction of your credit record may lead to an increase in your credit score.
Applicant’s Age:
The majority of lenders often set a maximum age limit of 60 years for loan applicants.
Furthermore, the majority of lenders typically mandate that borrowers fully return their home loans by the age of 70.
Therefore, those closer to retirement age, who lack sufficient ability to repay their EMI payments by the age of 70, have a reduced likelihood of being approved for home loans.
Advice: Applicants approaching retirement age might enhance their chances of qualifying for a house loan by including their working children or spouse as co-applicants.
Conversely, they can either increase or pay a higher EMI to reduce the likelihood of loan rejection.
The Capacity Towards Repayment of Home Loan:
Lenders are more likely to give home loans to people whose total monthly payments, including the EMI, don’t go over 50% of their gross monthly income.
That number might be too high for the investor, and they might not give you a loan or ask for a bigger down payment.
Hints: If you have a poor repayment capacity, you can minimize your house loan EMIs by opting for a longer duration.
This way, you can make sure that your total monthly payback responsibilities are between 50-55% of your income.
Alternatively, they might improve their eligibility for a home loan by including working family members as co-applicants or reduce the loan amount and EMIs by making a larger down payment.
Company/Job Profile of Applicants for Home Loans:
Lenders review applications for house loans in keeping with the job profiles or career histories of the candidates for the loans.
Applicants working for government or prominent private sector companies have a better chance of loan acceptance because of their higher employment security.
Those with less consistent employment—that of tiny businesses, unlisted organizations, or recently founded startups—may not be eligible for as much of a loan, though.
Advice: Applicants for home loans, can contact Housing Finance Companies (HFCs) when they are unable to get home loan approval from banks due to their occupation or employer profile,
Usually speaking, HFCs have less strict home loan eligibility criteria than banks.
Alternatively, people should search internet financial markets to find many lenders ready to offer them home loans depending on their credit ratings.
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