Top 3 Reasons that can lead to home loan disapproval

Posted by Imgc India on December 11th, 2017

Conditions for eligibility for a home loan in India are more or less the same for every home loan provider. However, some providers might require you to fulfill certain other eligibility conditions as well. When you apply for a personal loan, home loan, or any other loan, the loan provider judges your capability of repayment according to various factors like age, employment, income, etc.

There can be conditions under which a home loan application might be turned down. However, it is important to know exactly what the reason behind the disapproval was, as it can happen again, if you do not take steps to make it right.

Knowing about the common reasons of home loan disapproval can help you stay well-prepared. This is of course, apart from checking the basic conditions of eligibility for home loan in India.

1.Low credit score

Creditworthiness is the most important aspect of loan approval. Obviously, a loan provider will offer a loan to a borrower who has a stable repayment capacity. The creditworthiness of a person is adjudged according to the borrower’s credit score. Your credit score details your borrowings in the past, such as loans and credit cards, as well as your repayment record. So, to get a loan approved, a borrower needs to have a good credit score. A good credit score can be achieved by paying loan EMIs and credit card bills on time. In case your credit score is too low, you may be denied a loan.

2.Low repayment capacity

Repayment capacity is calculated by dividing your monthly take home salary (including other income sources as well, such as rent) by the debts you have (such as other loans, expenditures, etc.). Lenders consider your monthly emoluments in order to make sure that you will be able to pay back the loan within time. Generally, lenders allow an EMI up to a maximum of 35-40% of an individual’s salary. If your monthly take home salary is less and doesn’t allow you to repay EMIs, you might be denied a home loan.

3.Unstable employment record

Lenders provide loans to borrowers who show stability in their employment. As a condition for eligibility for home loan in India, borrowers need to have a certain number of years of work experience at their current workplace. While changing jobs isn’t an issue with loan providers, lenders approve loans to borrowers with at least a year or so of work experience at their current company. If your employment experience shows instability at your workplace, lenders can turn down your home loan application.

Understand the eligibility criteria and requirements of a home loan before you apply for one, to ensure that the process is hassle-free. If you’re having issues with home loan accessibility and are looking for an extra amount home loan, which your repayment capacity doesn’t satisfy, you also can try going for a mortgage guarantee backed home loan.

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Imgc India
Joined: February 28th, 2017
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