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Monday, 23 October 2017

Causes of rejection of a home loan

When you are applying for a home loan, you need to know the reasons due to which your home loan may get rejected. It will save a lot of time and money for you, but more importantly, it will save you from distress you will have to undergo should your home loan get rejected

Following are some of the most common reasons why your home loan application can get rejected-

1. Bad Credit History - If you have not paid your past loans regularly, most frontline institutions would reject your home loan application. If there are just a couple of minor delays in repayment track record of any of your past loans, your application can be considered provided you can justify the delay in repayment. Some borrowers are intentional defaulters and hence most leading home finance institutions do not compromise much on this point.

2. Title of the property is not clear - The property that you are purchasing should have a clear and marketable title. The seller/s of the property must be the legal owner/s and should have right to sell the property. Banks do not want to get into legal battles over the title of the property. If the lender feels that the title of the property is not clear, the loan may be rejected

3. If the property you are buying falls in a negative area - Some banks do mark some areas as negative areas. These are generally the areas where recovery of the loans may be difficult (areas having a lot of anti-social elements) or the areas where properties generally have structural issues (land may not be very suitable for construction of buildings or the area may have a history of collapsing of some buildings etc.). These are the areas where they do not lend the money. So if the property you intend to buy falls in the negative area of the bank to which you have applied for a home loan, your home loan application would be turned down no matter how strong your financial position may be

4. Dishonor of processing fee cheque - This is one reason that the home loan borrower needs to know before applying for the home loan. If the processing fees cheque gets dishonored, your home loan will not be disbursed. Banks see this as a sign of financial distress and hence do not disburse the loan on the bouncing of processing fee cheque (even if they may have issued an in-principle sanction letter)

5. Inter-Family Transactions - If you are buying the property from anyone who has a blood relation with you, your loan might get rejected, as most banks do not offer home loans on Inter-Family Transactions. They see this as an arrangement within the family to get a loan at lower interest rate as usually other loans are priced quite higher than home loans

6. Cheque Bounces in your Bank a/c - Too many cheque bounces in your bank a/c may also lead to rejection of your loan. It gives an impression that either you are in a financial crunch or you are too casual in fulfilling your financial commitments

7. Deliberate Hiding of some vital Information - It's always advisable to correctly reveal all the important information sought by the lender. A deliberate hiding of any material information may lead to immediate rejection of your loan. You should not break the trust of the lender by holding back some vital information that may have an impact on bank's decision to provide you the home loan applied for

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