So your home loan has been rejected. You are feeling miserable and the dream of owning your own sweet home has got shattered. Rejection of any sort is stressing. Especially when it comes to rejection of home loan, the situation can be overwhelming. However, you need not feel devastated. If you follow a systematic approach, you may be able to soon get to the point of being approved for the loan. So, here a few important things that you must know in order to achieve this objective.
First and foremost, you need to understand that the home loan rejection can be on account of multiple reasons. The underwriting process is quite exhaustive and factors various parameters to evaluate the loan application. The reasons of reject could be as follows:
This by large is the biggest reason for rejection on any loan. Despite being a secured loan product where the property is mortgaged with the housing finance company, a home loan can get rejected if the credit score is low. The low CIBIL score can be on account of two factors. First for the mistakes that one may have made in past and second on account of some errors in the report.
Both these can be worked upon and in due course of time, the issues can get sorted out. Let us first look at the first reason which is on account of the past mistakes. One may have on account of some exigency or due to ignorance may have defaulted in past which would have impacted the score negatively. Learning from one’s mistake is the biggest achievement, as the saying goes, one can approach the lender with whom the default happened. The approach has to be to close the account by paying complete outstanding dues rather than just settling the account which again is a negative flag. Once paid in full the bank shall update the account as closed and remove the negative flag.
In case the deficit on the good credit score benchmark has been on account of an error, one needs to raise the dispute with the credit bureau and the bank. The bureau and the bank updates the records in case they find the claim to be correct.
Repayment capacity is the second biggest factor that leads to rejection of loan applications. The housing finance companies evaluate the overall income, perceived living expenses and the existing loan obligations while calculating the repayment capacity. So if the loan has been rejected on account of this factor following measures could be taken to resolve the issue:
Another common issue, but easily manageable. Submission of proper documents and proofs is of utmost important in any loan application. Check on the documents once again and ensure that the correct ones are getting re submitted with the bank. The lenders would be considerate enough to accept the revised documents and process the loan again.
Each bank or financial institution has its own lending policy. If one has rejected your loan on account of credit policy, do not get disheartened. Approach another bank for the loan. The home loan product is today available to income levels as low as Rs 10,000 per month for salaried and Rs 2,00,000 of income tax return for self-employed. However, one important thing to keep in mind is that you must not shop around and apply for loan with multiple banks at the same time. This can lead to severely impacting your credit score and adversely impacting the underwriting decision. Seek help of a professional who can guide you on which bank to apply with.
So, go ahead and take corrective measures in case your home loan has got rejected.