Why Does A Home Loan Gets Rejected?

Posted by Rudra Raghavan on February 13th, 2020

Do you want to know why your application for a housing loan has been rejected? Let's look at the likely causes.

Was your application for a house loan declined? We know how frustrating it sounds. Though dwelling on disappointments is not wise. Instead, let's look at what may have gone wrong.

Understand why your application was rejected and benefit from this encounter. It will help you identify aspects of your financial conduct that need to be reviewed and strengthened. Try to acknowledge and immediately start fixing trends in your economic behaviour, such as delay in payment.

Declining for a home loan does not mean you will not get a home loan. Following are some of the reasons why your application might get refused –

Unstable income

Do you keep jumping jobs? Switching too many jobs sounds poorly when applying for your loan. Precarious work is one of the banks ' critical reasons for rejecting loans.

Most lenders prefer an application only if the applicant is in continuous employment for two years. Keep in mind that you need to give the bank enough proof of work.

Another thing to remember here. If the down payment is lower, lenders may not be willing to accept the loan request. Do not be intimidated by the challenge of paying an enormous amount in one go. The best investment you will make is a house and hence, saving is advisable.

Bad credit record

Because your credit history is one of the best ways to learn about your lending habits, lenders find your credit record as a dependable decision-making tool.

If there are records of missing or postponed credit card payments, applications for previously denied loans etc. Such factors diminish your credit score and then weaken your credit record.

Unpleasant remarks like bankruptcy and insolvency will make you a dicey investment for the bank. A low credit score is often the main reason why the application for a loan is rejected.

Current loans

Too many loans can leave lenders feeling doubtful about your financial choices. This may prompt the bank to act carefully and deny you a credit.

Only after analysing your income-to-debt ratio, a lender opts to comply with your loan application. If you have one or more current loans already, lenders will authenticate if your debts are more than your profits.

Do not be deterred by this because you can easily opt for a Short-Term Personal Loan to face your issues with your finances.

Incorrect documentation

Check your credit report periodically and fix errors such as inconsistencies and defective credit card transactions and faulty signature.

A condition for a house loan application is to submit current and valid documentation as evidence. In the event of misleading information being offered, the request will not be forwarded.

Make sure to file your Income Tax Returns (ITR). It’s because lenders and banks verify your ITR filings of the last two years before granting your application.