Why Your Home Loan Application Got Rejected? Find Out Now!

Last Updated : April 5, 2016, 11:09 a.m.

Home loan application rejection is not a new thing. Banks can reject your application on various parameters. In case if you fail to meet any of their eligibility criteria or their internal guidelines, they reject your application. Making the decision to apply for a loan is not you should take in a hurry or in rage. Besides, you should take a well-learned decision of borrowing the home loan. All your dreams of buying your future home is based on approval or rejection of your home loan application if you don’t have enough funds to buy the home with your saving. So it becomes a necessity to get your application approved in case you have finalised any property and already deposited the token money. While applying for home loan you submitted many documents and statements of bank, etc., to complete your application process. It requires a lot of time and efforts. Therefore, you need to be more cautions while applying for a home loan. There are many reasons, which could play a vital role in rejection of your home loan application. Let’s discuss a few of them in detail to avoid rejection of your application.

1. Educational qualification: Most of the lenders consider this factor while lending the money. They prefer to lend the loan to those who are qualified with the notion that they will not stay unemployed. Banks and other financial firms prefer those who are well qualified or must have at least done their graduation. Those who have just completed their 10 ^th or 12 ^th education have a chance of application rejection if they don’t have good repayment potential.
2. Work experience: This is another factor, which most of the banks consider. These banks and financial firms also mention minimum work experience in their eligibility criteria. Some banks ask for minimum 2 years of experience and some consider at least 3 years of experience as mandatory for application. If you have lesser experience than this there are chances that your home loan application might get rejected.
3. More dependents in family: If you have more dependents in your family, it is also considered your liability and gives a negative marking for home loan. If you are staying in joint family,with parents, two or more kids and spouse as home maker, it sounds nice in terms of family. But for your loan application banks rate them as your financial liability. More than three dependents are ranked as risky in terms of loan by the banks.
4. Working with start-ups and new organisations: If you are working with unestablished firm or with a start-up, it might be the banker will reject your application. If the bank is not satisfied with your salary and financial status, it might ask for the last three years employers financials. No bank will lend you a loan, unless it is not fully sure about your repayment capabilities.
5. In-between jobs with multiple offer letter: In case you have received too many offer letters from various employers, but not finalised one to join, this is called as jobless situation in the eyes of a bank. The banks consider your job/employment status and has nothing to do with multiple offers. It is more bothered about your pay cheques and monthly salary, not about number of offers you received. Therefore, accepting a new job offer during the application period may also prove harmful.
6. Self-employed without proved income status: If you have recently started your business and the business is not more than three years older, then there are chances that your application will be rejected. Banks accept application of self-employed with at least three years experience and a good financial track record of last three years.
7. Co-applicant is not as per bank guidelines: Banks accept co-applicants under a specific guidelines and grid. Don’t get emotionally carried away while applying for home loan. In case you want to apply for a joint loan with your friend, in-laws, cousins, colleagues, your application will get rejected. The banks accept direct blood relation and spouse as your co-applicant.
8. Property evaluation is lesser than the purchase cost: In case if the bank’s property evaluation team finds that your property’s market value is lesser than the purchase cost, the bank will reject your application.
9. Processing fee cheques getting bounces: This is an error all applicants should avoid while applying for a home loan. Most of the banks charge you some processing fee, which is not more than 2% + service tax of the loan amount. Therefore, always ensure that you have enough cash in your bank to pay the process fee at least. If your cheque gets bounced due to lacks of funds, the banks might consider you as not credit worthy and reject your application.
10. Buying older property: In case you have selected a property, which is older than 25 years or 30 years, banks will reject your application outright. Therefore, check the age of the property before applying for a loan. If the property is really old, then the risk factor also increases.