Buying a home today involves a lot of processes especially if one is applying for a home loan. Given the current prices of properties, it is difficult for most people to afford to pay the amount upfront thereby making home loans a much more viable option.
However, applying for a home loan isn’t a cake walk as there are a lot of factors that need to be taken into consideration for a lender/bank to approve one’s home loan application. Even the simplest imperfection in the application can lead to rejection.
Here are a few factors that play a crucial role in the rejection of one’s home loan and which you should pay close attention to, to ensure your application sails through smoothly.
1. Maintain a good CIBIL Score
Every person who has previously taken a loan or used a credit card has a CIBIL (Credit Information Bureau of India Ltd.) score. Banks check this score to decide whether or not a particular applicant is eligible for a home loan and is one of the most crucial deciding factors. There are several reasons why one might have a bad CIBIL score. Some of the reasons include
- Not paying/late payment of outstanding dues.
- Accounts going delinquent owing to delayed/no payment of EMIs.
- Non-payment of penalties.
To ensure a healthy credit score, it is important one ensures timely payment of dues and avoid taking too many unsecure loans. For the ones who already have a bad credit score it is pertinent he or she works towards improving it and then think about applying for a home loan.
2. Ensure Job Stability
For any lender, the utmost priority is the repayment of the loan. To satisfy this priority the lender will look at the repayment capability of the applicant. For salaried applicants the bank or the lender will look at the steady flow of income or in other words job stability. Most home loan repayment is normally sanctioned for 15-20 years making income stability for the future an important criterion.
Also if you are planning to take a home loan in the near future it is advised that one does not change jobs even though it might give a higher income level. Changing jobs is considered to create a negative impression to the lender.
3. Know the Salary vs EMI thumb rule
The thumb rule for applying for home loans is to ensure that the monthly EMIs are somewhere around 30 – 35% of your monthly take home pay. This means that if a person’s monthly take home is around 1 lakh then the monthly EMIs shouldn’t exceed Rs. 35,000. Banks normally take this as a benchmark to approve the loan. Hence it is important to know this and not over apply.
4. Verify property details
Home loan lenders approve loans based on the location of the property. If the locality has had a history where projects have suffered lack of clearance, acquisitions disputes etc. then the lender might reject the application. Hence proper analysis of a property before applying for a loan is sensible.
Also the property must have a proper marketable title and approval. In case of any discrepancies the lender in most cases will keep sanction letter valid till the applicant is able to find another property satisfying the title and approval norms.
5. Know the age limit
Age is undoubtedly one of the most important factors for evaluation of a home loan application. In most cases the minimum age bracket is 23-24 and the maximum age is around 60 for applicants. It is important to ensure that this criterion is satisfied before applying a loan as the probability of turning down the application is very high otherwise.
6. Verification of personal profile
It is important that the application has all the right personal details without any inconsistency. The credit report has all the personal details of the applicant and the lender/bank will go through these details on the lookout for any mismatch.
In case of a change in details it is important to update the lender with the same. One can avail a credit report for a nominal fee and cross check the details entered to ensure that the loan application is not rejected.
All these points are crucial in the approval of a home loan and it is prudent to ensure that they are followed properly to avoid a rejection.