There are many lenders eager to offer home loans to borrowers. However, lenders will look at your income and credit when deciding whether to give you a mortgage. The loan application will be denied if either of these conditions is not met to the lender’s satisfaction. Loan eligibility is affected by factors such as the applicant’s age, country, and level of education.
The following are some additional tips to grasp before you apply for a home loan that may lead a lender to reject your application.
1. Job Uncertainty
To decide whether a borrower can make their loan payments on time, banks and non-banking financial organisations (NBFCs) frequently look at the borrower’s employment history.
Borrowers may not get approved for the lowest home loan interest rate unless they demonstrate that they have been with the same company for a predetermined number of months or years. Those with patchy work history, temporary or seasonal employment, or a history of job hopping are more likely to have their mortgage loan application denied.
The loan’s length directly affects whether you qualify for a house loan. Most lenders have a minimum and maximum age criteria – it is typically between 18-65 years. It is usually different for salaried and self-employed persons.
So, the younger you are, the longer the tenure eligibility. For example, for borrowers aged 28 years, the tenure is up to 20 years. However, for a 58-year-old person, the tenure option is restricted to 7 years.
3. Inability To Get “No Dues Certificates”
Every borrower looking to close a home loan requires a “No Dues Certificate” from their lending institution. However, if the borrower does not get this certificate from a previous loan, it will show as a loan and can impact the credit score and debt-to-income ratio.
Hence, the inability to get the NOC from a bank or NBFC could become a reason for rejecting a home loan application.
4. Unapproved Property or Builder
Lenders will ensure the property for which a home loan is sought has local government approval. The loan application could be denied if the borrower did not follow the rules set forth by the local government.
Similarly, banks are quite selective to who they lend money, including the construction industry. So, a borrower’s chances of getting authorised house loan are lower even if the local authority has approved the property itself, but if the builder is not on the bank’s approved list.
5. Faulty Credit Report or Low Credit Score
A borrower’s credit score reflects the creditworthiness of the person or persons applying for a home loan. A minimum score of 650 is generally required to get the loan approved. A credit score lower than 650 sends a negative message to potential lenders about the borrower’s capacity to make monthly mortgage payments.
Always check the credit report for errors; a low score will lead to a mortgage application being denied.
6. The Property’s Age
A home serves as collateral for the loan. Lenders will likely do the standard legal and technical checks, but if the property is ancient, they may also consider structural collapse. There are situations where the property cannot guarantee a loan because of its age or its condition.
Banks’ loan amounts are typically between 65% and 85% of the property’s value. Some factors affecting the market price of a property are:
- Age of the building
- Condition and quality of the structure
- Location of the property
So, an old property that is not maintained will have a lower value, leading to a lower loan amount or loan rejection.
7. Documentation Gaps
A borrower’s ability to get the lowest home loan interest rate primarily hinges on the paperwork you provide. Lenders may have difficulty providing an unbiased evaluation of a home loan application, especially if the necessary paperwork is missing or illegible.
It is essential to double-check the loan application and all documents before clicking on submit.
The above tips should help borrowers clearly understand what to do and not do when they apply for a home loan. It is essential to ensure creditworthiness and ensure loan eligibility is met before applying. It will save time, enable a high loan amount and not have a negative impact on your credit score.