Reasons Why Banks Reject Your Home Loan

Introduction

Reasons why Banks reject your home loan are the causes and factors that lead to failure of getting a loan. These reasons include:

Low credit scores
Unstable employment history
High debt-to-income ratios
Insufficient income
Incomplete documentation
Past loan defaults

To get a home loan easily, people can properly set up the documents and ensure financial stability.

Some of the top reasons for home loan rejection by banks are given below.

Poor Credit Score

A credit score is a vital factor in getting loan approval. If your credit score is low, a loan application can be rejected. You have to keep your credit history clean to get easy approval.

Job Stability

Job stability is another factor banks notice prior to home loan approvals. If an applicant changes jobs frequently, it creates a sense of uncertainty for the banks. Banks suggest the borrower should serve a company for three years.

Age while Application

Banks verify the age of the applicant before giving a home loan. The home loan application is more likely to get rejected if an applicant is close to retirement. Age is verified by banks to understand borrowers' capacity for repayment. But, the loan can be approved if you have sufficient savings or income to pay your EMI.

Property Issues

The location & the age of the property play a vital role in increasing the chance of home loan approval. The property selected should have met the prescribed guidelines. In case the property fails to meet certain conditions, banks reject the home loan.

Unpaid debts

Unpaid debts are a major factor in home loan rejection by banks. High-rate debts and unpaid dues impact poorly on repayment capacity. Unpaid debts show you are unable to have adequate resources to pay your EMIs.

Incomplete Documentation

Banks grant home loan applications on the basis of provided documents. The applicant needs proper and valid documents in order to get the loan. Providing incomplete documents to the bank can be the reason for home loan rejection.

Income Tax Return Filing

Everybody needs to file an income tax return every year, whether asked by the company or not. Banks check income tax records before giving home loans. The banks check tax records for the last two years.

Being a business owner or fresher

The banks check the complete profile of the borrower before extending a home loan. Banks prefer not to sanction loans if the borrower is either a fresher or a new business owner. The banks consider these profiles as low capital profiles. Banks think these profiles does not have the ability to repay the loans.

Unable to provide NOC on a previous loan

No Objection Certificate (NOC) is a legal document the applicant needs before applying for a new home loan. This certificate proves that the borrower does not owe any unpaid dues from previous loans. It is mandatory to submit NOC to banks unless it could lead to rejection.

Conclusion

The list of reasons for home loan rejection is long. Hence, ensuring certain factors is very important to get bank approval. Here are some ways you can increase your credit score and your chances of home loan approval.