Top 5 Reasons Your Home Loan Application May Be Rejected

Typically, banks and non-bank financial corporations (NBFCs) view job stability as one of the primary parameters in determining the borrower’s ability to make timely repayments.

The 5 main reasons for the rejection of a mortgage application: When you apply for a home loan, the two main checks that lenders perform are credit rating, history, and income. If any of these items do not meet the minimum requirements of the lender, the loan application will not go ahead.

Apart from this, lenders will also look for stable employment and income records. Factors such as age, nationality and even education level could also affect the approval of the loan. Inaccuracies in your request, including with respect to name, age, address, etc., make it difficult for the bank to generate the necessary information about you and may result in the request being rejected.

Here are some other factors that could lead to the rejection of your mortgage application.

1. Age and remaining years of service

Eligibility for a home loan is directly linked to the duration of the loan. “If you’re younger, you have more time to pay off your loan. So you can have a loan with longer term and lower EMI. However, if you are older and are due to retire soon, you will get the loan for a much shorter term because the loan must be closed before you retire. If the resulting EMI is higher than what is acceptable to the lender, your loan application may be rejected, ”says Adhil Shetty, CEO of BankBazaar.

2. Low valuation of the property

Banks typically offer up to 85% of the property’s value as a loan. Regardless of the market price, banks carry out their own property valuation, which takes into account several factors such as the age of the building, and the condition and quality of the construction, the location of the property, etc. So even if you are eligible for a higher loan amount based on your income, the bank may reduce or reject your loan if they find that the property has a lower valuation.

3. Unapproved property or builder

Lenders check if the property is approved by local agencies. If he does not follow certain guidelines prescribed by the local authorities, the lender can refuse the loan. Likewise, builders are also well scrutinized by banks before financing their projects. If you opt for a property from an unlicensed builder or blacklisted by the bank, the chances of getting a home loan approved are slim even if the property has been approved.

4. Age of the property

When you take out a mortgage, your property is held as collateral by the bank. “If the property is very old, lenders can also conduct a survey to assess the likelihood of structural collapse in addition to their usual legal and technical inquiries. In some cases, the condition of the property or government standards surrounding the old property may not allow the sanction of a loan against it, ”says Shetty.

5. Unstable employment

Typically, banks and non-bank financial corporations (NBFCs) view job stability as one of the primary parameters in determining the borrower’s ability to make timely repayments. Some lenders also insist that the borrower be employed by the same company for a period of at least three years or more to be considered eligible for a loan. People with little work experience, contract jobs, or those who change employers frequently are at higher risk of facing mortgage rejection.

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