When it comes to home loan applications, lenders consider several aspects. This means that if an applicant does not satisfy any of the essential eligibility criteria, the application can be declined.
Home Loan: Housing is a complex process that is so much more than the selection of a suitable home it is a major investment, indeed one that can be the biggest throughout the average person’s lifetime. Fund acquisition strongly depends on market conditions, whereas minimizing the disturbances to other critical aims and objectives remains a crucial aspect. This is made possible through home loans that allow you to use your future income to secure your dream home. However, sourcing for a home loan is a very important factor to consider when constructing or even purchasing a new home. It is a process that needs a lot of research, planning, and preparation, and sometimes preparation of certain documents. As much as preparation takes time and physical and/or material resources, one can avoid wasting all that in one attempt.
There are reasons why a home loan application may be refused; generally, they are as follows: Here are the top five major reasons for rejection: Here are the top five major reasons for rejection:
1. Poor Credit Score
A credit score is a record of an individual’s credibility as a financial personality. Low credit scores indicate matters like missed payments or high credit utilization that make the lenders avoid approving your home loan. The credit score system makes consumers wary of your financial capability to repay the loan, hence affecting your qualification for the loan.
Those applicants with good credit scores stand high chances of having their loans approved and with low interest rates, while those with low credit scores stand high chances of having their loan applications rejected or be charged high interest to cover the defaulted risks.
Your credit score indicates how good you are at repaying your loan. Credit score is always associated with creditworthiness, and it is one of the things that lenders do not take lightly. The following tips will help keep your credit score: you can keep checking with various bills and the existing loans and making payments on time.
2. Age Of An Applicant
If you are near the retirement age, you might find it rather difficult to obtain a housing loan because of the limited time that you have for paying back the loan. Lenders use the provisions of age control where the maximum age of the applicant for a loan does not exceed 60 years of age and all the loans should be reimbursed by the age of 70 years. However, if you can prove to a lender that you are capable of repaying the loan before you retire, he will most likely accept it.
This remaining risk is well addressed by incorporating the working children or the spouse in the home loan application since this increases the overall total income—family income aspect. It means they can choose a higher EMI in order to minimize the chances of being rejected a loan.
3. Job Stability
While it is normal for employees to move from one company to another in search of a better-paying job or for other personal reasons, frequent movement from one company to another may create some concern for the lenders. Employment continuity is one of the most stringent requirements as far as home loan approval is concerned because it is expected that the borrower should remain with his employer for at least three years. In case the given applicant has been working for a company that, despite being a legitimate one, the bank may consider insecure, the loan application will be declined.
Despite this, there are ways on how you can increase your possibility of getting a home loan approved, one of which is paying your Equated Monthly Installments, or EMIs, credit dues, etc. on or before the due date. In general, you can expect to be provided with free credit reports from the credit bureaus or any other online finance solutions at least once a year. Correct records in the credit report assist one in raising his/her credit score.
4. Property Issues
The property that you have to choose can only be in a place that was approved by the authorities to be able to avail of a home loan. It should be noted that older properties are not favorable to lenders; hence, they may not be willing to provide loans for the properties due to their poor condition and low resale value.
Given the fact that the property acts as the only collateral for the loan, its title, location, and age receive adequate attention. They are likely to decline applications that involve properties whose ownership analysis This is likely to result in rejecting the applications meant for properties whose titles are not well defined or those that do not meet the set laws of the land. Also, the properties older than the others may be a vice because they have a lower market price most of the time.
If you wish to have a smooth loan process, you should make sure that you are buying a property that is free from title problems and has all the necessary permits from the local government before making the final purchase.
5. Repayment Capacity
This makes it clear that loan providers usually prefer those clients who applied for home loans and have a better record of debt servicing, especially in terms of actual repayment and management of the existing loan. You may face problems with the repayment even with a positive credit history because of the primary borrower’s poor repayment history and default in EMI payments. This could be very dangerous because you lose credit scores and hinder your loan application, which may lead to refusal.
To enhance the eligibility of a loan, the applicants, such as those with low repayment abilities, should look forward to the long-term loan to reduce the EMI and keep total monthly installments as per the preferred value limit. Or they can pay a higher down payment, which will decrease the loan amount and therefore the EMI, or include working family members as co-borrowers to improve home loan options.
