How To Avoid Rejection of Home Loan application

Earlier getting a home a loan was easier as the lending companies or banks were competing with each other to attract maximum borrowers through attractive schemes such as teaser home loans. But now Reserve Bank of India (RBI) announced a series of monetary measures that tightened the norms for home loans. The RBI also sought to discourage banks from aggressively selling “teaser loans”, which are a big hit with people who want to buy houses. There can be number of reason for rejection of home loan application. Once an application is rejected, it will affect your credit record and can have an impact on your ability to get a loan approved.

Reasons for Rejection of Home Loan application

Lenders are currently receiving high volumes of application but RBI monetary measures that tightened the norms for home loans and the bank may reject your home loan application for various reasons. However, by knowing some of the finer points of the conditions for approval you may be able to avoid rejection on your home loan application. When you approach a lender, you can expect following three approval phases.

• Verification of Your personal profile: The first phase of home loan application verification process is verification of your personal profile. Bank will verify all the information that you have provided in the application form. If they find the information incorrect or incomplete, the application is liable to be rejected. Bank also verifies age, repayment capacity, total dependents and stability of your income etc. If you are employed, they will look at the duration of your employment and are likely to request three to six months pay slips to verify your employment details.

• Verification of Your credit history: Second phase in verification for approval home loan is verification of your credit history. This plays vital role in deciding whether to approve you home loan or not. Borrowers should be careful in maintaining their credit file in good order by paying all bills when they fall due. If the applicant has a huge credit card balance, a couple of personal loans and a vehicle loan or his income could be barely enough to make repayments towards existing debts. This may lead to rejection of your loan application.

• Verification of Your Property: Sometimes, a lender may not be satisfied with property documents or title, or may opine that the builder does not have the necessary approvals for the project. The bank will also conduct an enquiry and make sure the property is not illegal or disputed. If the property title is not clear or the property is already mortgaged the application is liable to be rejected.

How to Avoid Rejection

Unless you have some serious credit issues, you need not fear about rejection of home loan application. All financial institutions have their own set of lending policies when assessing home loans. When you are applying for a home loan you need to keep certain things in mind.

• Do your paperwork: Before applying for home loan, consult as many banks and lender as possible. This helps you to know the criteria or conditions and best deals available in market for your home loan. Consult brokers or real estate agents. Brokers will advise you on all the costs that you will be liable to pay and all the documents that you will have to provide. By keeping detailed financial statements and records of income and expenditure throughout the period prior to application you will increase your chances of getting approved for a loan.

• Improve credit history: Make sure that your monthly income meets minimum income requirement and also try to keep clean credit background. In order to ensure a good credit history, it is important to re-pay your loans on time. Making your payments on time will have the most significant impact on your credit record. If your total borrowings are significantly high, use some of your savings to repay some of your debt.

• Check Criteria: Know the criteria or lending policies of bank or financial company you are applying loan. Some banks or housing financial companies have restrictions of location, certain builder or criterion of minimum area requirement etc. So before you apply for loan, check with the lender about the criterion or conditions.

• Clear title properties: A title certificate states whether the property is unencumbered and has a clear marketable title. In many cases, the lending bank has its own advocate who specializes in this exercise. Usually, the cost is nominal and is built-up in the processing and administration charges of the bank for sanctioning and disbursing of the loan. A search report gives a buyer the confidence that he is undertaking a transaction with a genuine party and lending company that title of property is clear and marketable.

Banks will verify all the information that you have provided in the application form. If they find the information incorrect,then the application is liable to be rejected. It is essential to be a good record-keeper and have your paperwork in order before applying for a mortgage or home loan. Pay attention to your credit history and know the criteria or lending policies of bank before applying for home loan.

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