With home prices and mortgage interest rates becoming more affordable, now is the time to take out a home loan. Not only does it help you take an important milestone in life, it also gives you an asset to count on during uncertain times. However, you can only get a loan on favorable terms when you meet the mortgage eligibility terms set by the lender you have chosen. In addition, your history of repayment and processing of outstanding debts plays a role in whether or not your application is approved.
While the lack of income to support the repayment is the most obvious reason your home loan application may be turned down, there are a few other reasons why it may be happening. Read on to find out more.
Bad credit history and score
One of the most important factors that affects your eligibility for a home loan is your CIBIL score. A score of 750 or higher is ideal and reflects both credit experience and good repayment habits. A low score, on the other hand, positions you as a less reliable borrower with a higher potential for default. This may be one of the reasons why your home loan application is repeatedly turned down.
You can increase your credit score by ensuring on-time repayment of existing loans and credit card bills, decreasing your use of credit, not asking for too many loans at once, and making sure you have money. experience with a mix of unsecured and secured credit.
Job instability
The younger you are, the more likely you are to get approved because it means you have more years in the workforce to be able to pay off the mortgage. However, the lender will still want to see your employment history. A candidate with a stable career and fewer job breaks is preferable, as the lender is unlikely to take a risk on someone who has not demonstrated commitment or financial security.
Being fresher in the job market is also not preferable, as lenders would like to see your income or performance history. Ideally, you should have at least 3 years of professional experience, preferably in a business, to increase your chances of getting approved for a home loan.
Fewer years of work remaining
Older applicants may be rejected if they are approaching retirement age. This happens because their years in the workforce are limited and therefore the mortgage term is shorter. Since your repayment capacity decreases after retirement, the lender may be reluctant to take a risk.
For such an applicant, the lender can always calculate EMI mortgage before rejecting the request. If it is more than 50% of the applicant’s monthly salary, the chances of the mortgage application being rejected are higher. In such cases, you can take out a joint home loan with a younger family member to get approval.
Lack of proper documentation
There are many documents required for a home loan application, and you should make sure you have them all in place before you apply. You should:
- To file tax returns in right time. Before approving any home loan application, lenders often check to see if you have filed income tax returns for at least the past two years.
- To prepare property documents which show the suitability of the property. Lenders prefer properties that have stable value, long-term structural stability, and can fetch a good resale price. The lender is also likely to prefer a property built by a well known and trusted builder.
- Get a NOC (Certificate of No Objection) for previous loans that you have repaid or closed. This helps the lender to see your repayment history in a timely manner.
- Check your CIBIL Note. This is important, especially if your home loan application has already been rejected. These rejections affect your score, so take the time to make the necessary changes before applying for another home loan or going to another lender.
Also, make sure that your name, address, and other relevant information are not misspelled or appear differently from document to document. In some cases, this also results in the rejection of your application.
The important thing is to stay prepared and know what lenders are likely to be looking for in a home loan application. If you are ready with the right supporting documents, a good credit history, a solid real estate appraisal, and can show stability and career growth, it is likely that your mortgage eligibility will increase and your home loan will be approved before you wouldn’t know it.
In addition to avoiding the pitfalls mentioned above, choose the right lender who has simple and straightforward eligibility criteria for home finance. For example, the Bajaj Housing Finance Limited home loan has simple eligibility requirements, offers sufficient funds, and has a nominal interest rate starting at just 6.75%. To take advantage of its many benefits, strengthen your credit profile and apply today to begin your journey as a homeowner.
