There are many lenders out there offering great home loan plans. This works to benefit borrowers who are looking to get financial support to afford property purchases. However, there are many cases where applicants get their home loan applications rejected. Now, this is not always because lenders are rigid. Many applications get rejected simply because applicants are not aware of the home loan eligibility criteria set by lenders.
Getting too many applications rejected is a negative mark for the next lender evaluating your application and deciding whether to approve a loan. Hence, it is better to keep the following points in mind before applying for a home loan:
An application is more likely to be rejected if the applicant is close to retirement. The reason for this is that such applicants are at a risk for the lender because of their limited repayment capacity. There are some lenders that can offer short-term home loans for such applicants. However, do note that such loans would result in high monthly instalments.
- Job record
As a lender, financial institutions prefer applicants who show a steady employment record. Changing jobs frequently can reflect negatively on your housing loan application. Working in a reputed organisation for three consecutive years or more is considered to be a good employment record.
- Unapproved property
When you apply for a home loan, the lender will also check whether the property has been approved by the local authorities. If it is not adhering to specific guidelines set by these local authorities, it is possible for the lender to reject the loan application.
- Unpaid debt
It is always considered best to not have any existing monthly instalments while applying for the home loan. This is because having existing debt might reduce the repayment capacity of a borrower, which is why lenders prefer them to not have any debt while taking the home loan.
- Property age
Lenders also evaluate the age of the property while deciding whether to approve a home loan application. If the property is very old, a lender might have to review the possibility of a structural collapse, as well as conduct technical and legal investigations. If the condition of the property is not satisfactory, it is possible for the lender to reject the loan application.
- Credit score
An applicant’s credit score is a reflection of their financial responsibility. Failing to repay a loan’s monthly instalments, skipping dates for credit card bill payments, and so on can negatively affect your credit score. Lenders consider a credit score of 750 or above to be a decent score and while this can differ from lender to lender, not having a good score can result in the loan application getting rejected.
Now that you are aware of things that need to be kept in mind to avoid an application rejection, go ahead and apply for home loan. Do note that the criteria for a housing loan could differ from lender to lender, which is why it is considered best to check with the lender before applying for the loan. Also, make sure to check the documents required to ensure a smooth documentation process.