When Bala walked out of the bank after applying for his home loan, he was confident that he would get it. He had a near-perfect credit score, no debts, a steady job with a good salary, and a perfect credit history.
But he was in for a shock a few days later. His home loan application had been rejected, leaving Bala searching for plausible reasons.
Although Bala had ticked all the important checkboxes for qualifying for a home loan, there were other factors beyond his control that had obstructed the loan process. In this short guide, we take you through some of the lesser-known reasons for your home loan being possibly rejected.
Employer status
Bala might have had a steady job, but he worked with a startup. The bank always reserves the right to reject a home loan if they find the employer’s financial history not stable enough. Since home loans are issued for at least 15 to 20 years, banks need to be convinced of the applicant’s ability to earn in the future, as well. Bala had also joined the company only two years earlier, and banks insist on having a minimum of three years of work experience in the same organisation to be eligible for a home loan.
Property approvals and value
For banks to approve a home loan, the property that you intend to buy should have all necessary approvals and documents in place. It should also be located on land that has been developed with all legalities intact.
Additionally, the bank should also be convinced of other factors associated with its longevity. For instance, an old property that is many decades old might lead the bank to deeply consider its quality and potential to weather out the tenure of the loan.
Banks also evaluate the property to ascertain its financial worth. If you opt to buy a house from the owner of the house, then the price that you mutually decide must either match or fall below the valuation that the bank arrives at. Banks may issue a lower amount or reject the loan altogether if valuation levels are unsatisfactory.
Defaulter’s address
Buying a property that was rented out earlier? Make sure to seek out details of the previous tenant to ensure your home loan is not rejected. Banks blacklist both names and addresses of people who default on a loan. The blacklisted address turns up in their scrutiny when you apply for a home loan and has a possibility of being rejected.
In some cases, borrowers from a particular area might show a consistent pattern of defaulting on loans. Banks keep these areas on their watchlist and are wary of granting loan applications from there.
NOC from the previous lender
You might have meticulously paid off your previous loan well in time with no dues. But did you remember to take a NOC from your lender? When repayments are complete, we revel in the relief that washes over us and tend to forget to tie up the loose ends that remain. Getting a NOC from the lender at the end of finishing your loan repayments is crucial for availing future credit.
Unpaid phone bills
Having a pending credit card payment or unpaid EMIs on other loans are some of the most common reasons for a home loan being rejected. However, even phone bills need to be in order to ensure the home loan process is unhindered. Unpaid phone bills can impact your credit rating, and banks could reject your home loan even if all other factors have been met.
Source: roof and floor
