Powerful Guide to Avoid Getting Rejected for a Home Loan
Posted on July 9th, 2020
Even though the growth of this advance is high, home loan applications do not always materialize to approvals owing to several reasons.
Reasons for home loan application rejection
Home loan quantum can be considerably high compared to other credit facilities. On that account, financial institutions conduct a thorough assessment of loan applications to determine whether to advance home loans.
A few reasons why home loan applications are rejected are –
Low credit score
A credit score is an essential variable for financiers when considering any loan application. Your credit score reflects your attribute as a borrower. A poor credit score represents that you are not responsible as a borrower and can be a potential liability to the financier. Henceforth, ensure you have a CIBIL score above 750 before applying for a home loan.
The financier also takes into account your credit repayment history when assessing your loan application. In case you have repeatedly defaulted on your repayments in the past, it might lead to rejection of your application.
It stands for Fixed Obligations to Income Ratio. It is the ratio between your recurring monthly obligations and your income. Ideally, it should be within the range of 40% - 50% to ensure you have the necessary financial capability to repay your loan. Financiers might reject your loan application if it exceeds such limit.
One of the primary factors that lenders consider when assessing an application is an individual’s job stability. If you are prone to change jobs frequently, the respective financier can reject your loan application.
You should consider staying in tandem with the necessary criteria for home loan eligibility to ensure your approval of home loan application. Additionally, make sure to submit all the documents necessary to avail a home loan.