Factors that can Lead to Rejection of your Home Loan Application.

Do you know on what basis banks approve a Home Loan? Because a home loan is something that we all have in our financial mix. And this is a loan that is generally availed by all salaried employees. At time, you would wonder, that despite most of the things being in line with requirement, you failed to get a home loan from bank.

Banks do several inspections on you, before they grant home loan. One good reason that makes the borrower a risky bet, is sufficient for Banks to reject the loan application. Listing out some key reasons based on which, a Bank may reject the loan application.

Lower CIBIL (Credit) Score

A lower CIBIL score makes the case prone to rejection. Scores lower than 550 are considered low. While on the other hand scores above 700 & 750 allows access to credit at better differential rates.

Properties in ‘red zones’

Banks typically have ‘red zones’ list where they never lend. If the property falls in that list, its difficult to get a home loan.

Past defaults

For a history of non-payment or a sloppy payment record with that bank, banks are averse to lend to such a borrower. While the same would also mean a dented credit score. In case of multiple instances of repayment defaults will lower confidence and might lead to rejection of application.

Existing EMI burden

Borrower’s ability to service loans is judged by availability of monies after servicing all existing EMIs and leaving aside about 50% of salary for personal/household expenditure. In case 50% of monthly salary is not sufficient to service EMIs, the banks would be averse in lending the desired amount and might lend a lower than applied amount.

Unavailability of track record of Income tax returns

Banks generally ask for the tax return documents of the past two years. Unavailability of documentary support to of return might lead to home loan application will be rejected.

Encumbrances on the property

Banks will never finance a home that is clung in any kind of legal battle. Banks restrain from financing on a property, if there are any questions over the title documents, which generally comes out in the legal due diligence exercise carried out by the bank.

Nature of work

Self-employed people find it difficult to secure a housing loans. Self-employed borrowers do not instill the same assurance among the bank officials, as a salaried borrower does. Banks are skeptical as establishing the flow of stable income of borrower becomes challenge. Such things might lead to rejection of application.