Home Loan Rejection Causes


Many of us dream of owning a home of our own, but due to financial constraints, we delay the process of home buying. A home loan, usually becomes essential for the person who are a bit financially unsound. In an effort to get a dream home, we do have a financial hand in the form of home loans. Home loans are a savior for many in the country for getting a first home of their own. While, there are many home loan providers in the country, there is no dearth of options for the people looking for suitable home loans. With the easy process on loans, getting home loans is never a trouble. But, still many a times, people have to face home loan rejection scenario.

Here we are going to discuss some of those Home Loan Rejection Causes:

1. CIBIL Score

Check your CIBIL Score before applying for a home loan as low CIBIL Score is the first reason for home loan rejection. Thus, getting a CIBIL Score from CIBIL should be the first step before applying for a home loan. There are various ways to improve your CIBIL Score and following all guidelines as laid by CIBIL can result in the improvement of CIBIL Score. Keep all dues clear and file a Tax return to get a good score on CIBIL Score.

2. Your residential address is on the defaulters’ list

If you are sharing the same address, which is already on the defaulter’s list, you may be deprived of the home loan. This reason can be a prime reason and there are very high chances that your home loan application will get rejected.

3. Loan guarantor to a defaulter

Have you ever become a loan guarantor to someone? If yes, and the same person never cleared his dues and is on the defaulter’s list, the time is for you now, that you are going to pay up for his deeds. Your home loan application may get declined over this issue. Thus, never become a loan guarantor of someone unless it’s important and even if you are becoming a loan guarantor of someone’s loans, make sure, the person clear the loan dues.

4. Age can be a concern

This is one of the prime reasons, under which you may be deprived of home loans. In case, you are nearing the age of retirement, the lending agencies may hesitate in allotting you the home loans. They may be eager to pay you short term loans and will try to keep themselves aloof from all sorts of longer tenure loans.

5. Unstable Job or Source of Income

Are you a job hopper? The frequent job change may result in an impression of unstable behavior of a person in front of the banks. Banks and other lending agencies place a high stake on the job stability and reply on these qualities of a person before deciding on the security of the loans. Many banks even have criteria that a person must be an employer of a particular organization for at least 3 years. Thus, frequent change in the job may result in home loan application decline.

4. Loan application been rejected before

If your loan application has been rejected for some reason before, it is advised to wait for some time before applying for another loan as CIBIL records all activities like loan rejections etc.

5. Property you are purchasing does not satisfy policy guidelines

One must always keep in mind that not all residential properties are eligible for home loans. Thus, property can be one of the many reasons for the home loan rejection. It is advised to go for the properties which are established and are designated, are constructed by renowned builders. Banks do check if the property can be easily sold off in case of recovery of the loan amount.

Some other lesser known Home loans rejection causes are as below:

6. Educational qualification

Some lenders take educational qualification very seriously and thus, in this case, home loan application can get rejected in some cases. In some noticeable cases, undergraduates are lesser preferred category for home loans.

7. Too many dependents

It is always good to live in a joint family, but sometimes, it can be a hindrance in getting home loans, etc. More than three dependents is a risky number, which many loan officers look towards before giving an approval of someone’s home loan application.

8. Career change from salaried to self-employed

A very common factor in a person’s life; career change can be a reason for someone’s home loan application rejection. As seen in some cases, even the top level executives who were drawing a salary of crores a year can be rejected for home loans because of their sudden change in job status. One needs to be in business for at least for minimum three years with at least two years of ascending profit lately.

9. Property valuation is lesser than purchase cost

A purely incidental reason, sometimes the property valuation is lesser than the purchase cost. One must keep in mind that all properties have a fair market value and a hike from that rate will lead into getting your application rejected.

10. Processing fee cheque getting bounced

The most common error by the applicant in the form of a processing fee cheque getting bounced can be a reason for home loan application being rejected. This is an error, which no applicant should make. While, the home loan application calls out for a nominal fee of maximum around Rs. 11000, make sure that the Processing fee cheque never gets bounced, as it may in return result in the rejection of the Home loan application of yours.

Getting a home loan is an easy task if everything is followed in proper order. Make sure you take only the required loan amount and always aim to minimize the needs for your home loans as you’re the person who is going to pay the loan amount with the high interest amount in ongoing future.

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