Why Your Home Loan Application Got Rejected: Possible Reasons

Before giving you a loan of any kind, banks would do a lot of background checking to ensure that they are giving the loan to a person who has the ability to repay the loan amount with the interest. In case of home loan, banks also check the property you are buying and the location before approving the application.

Here are some of the most common reasons for rejection of home loan applications:

• Bad credit history:

Call it blast from the past. If you have defaulted on any loan in the past due to which your credit score is low, the bank would readily reject your loan application. It would not take risk with a person who has already been an offender in the past.Once credit history takes a knockdown due to your past behaviour it takes some time to redeem it. Pay your past dues and wait for sometime before the bank removes your name from the blacklist.

• Too many outstanding loans:

The bank would take all the outstanding EMIs into consideration and then see if after paying all the existing EMIs, your monthly salary allows you to take another loan. Usually, banks give an amount in loan, the EMI of which is not more than 50% of the in-hand salary (after deducting the existing EMIs). If after deducting the existing EMIs, only a small portion of your salary comes to you then the bank would not give you the loan.

• New to a job:

Banks don't trust job hoppers with long-term loans such as home loans. Job stability is an important parameter for banks to decide whether to offer the loan or not. If you have been working with your present organisation for three years or more then only they would consider you for a home loan.

• Non-filing of tax return:

Banks usually ask for two-three years' tax return documents to establish regular cash flow of the prospective buyer. Inability to furnish three previous years' income tax return can be a reason for rejection of your application.

• Property not approved by the bank:

The real estate market is full of fly-by-night builders. Not all banks are comfortable with any builder or project. If your property is not approved by the bank, your home loan application would invariably be rejected.Similarly, if your property is based in a locality which has been illegally developed over the years and the government has not yet regularised it, the bank would not give loan for such a property.

• Your age too close to retirement:

If your age is above 50 years, and you have applied for a 20-year home loan, banks would not consider such an application. The tenure of the loan should not be more than the difference between your age and the age at which you would retire.

• Your employer not in the list of bank-approved companies:

Start-ups are the flavour of the season, and you might have left your job with a renowned company to join this five-year old start-up. However, it is quite likely that your employer is still not well-known, and therefore, not in the list of the companies that banks display at the time of applying for loan. There are chances that bank may reject the application of an individual working with such a company.

Authored by Rishi Mehra, Co-founder, Deal4loans.com