Affordability of individuals to purchase a house in various Indian cities has increased in the last 10 years. It is mainly owing to the stimulants like income growth, stagnant price of homes and easy availability of housing loan at lower rates of interest.
As per a finding, the median affordability index for house purchase remains at 4.5 times of average annual household income. Except a few like Mumbai and Hyderabad, most other cities remain below the affordability benchmark of 4.5. Adding to it, three rate cuts announced by RBI in the past six months further make house purchase affordable through lower home loan interest rates.
Nevertheless, you have to meet a few compliances to avail a home loan and take advantage of the attractive rates of interest. You also need to make sure that you complete the application procedure smoothly and receive approval.
To ensure this, have a look at the reasons that may result in home loan application rejection and see that you eliminate them before applying for the same.
Reasons for rejection of your housing loan application –
- Missing out on any of the eligibility criteria
Lenders list down specific eligibility criteria you need to meet to avail a housing loan. It includes eligibilities related to the applicant’s age, income profile, residential status, etc.
For example, a self-employed individual should be an Indian resident with age between 25 and 70 years and a minimum of 5-year continuity in current business to avail this loan.
Similarly, an employed applicant must meet home loan eligibility criteria for salaried individuals to avail the same.
- Holding a low CIBIL score with weak repayment history
CIBIL score is a 3-digit number that lenders check to decide on an individual’s creditworthiness. It plays a critical loan in determining whether your housing loan application receives approval or not.
While a credit score of 750 and above is considered good, your repayment history is also taken into account for the purpose. Irregularities in credit repayments, EMI bounces, etc. hurt your credit score and repayment history, which may result in application rejection. Hence, maintain your repayments, meet liabilities and keep a low debt-to-income ratio to boost this score over time.
- Carrying debt beyond repayment capacity
Your debt-to-income ratio becomes the parameter to estimate your repayment capacity. It is the percentage of the debt you have availed against your income. Your debt-to-utilisation ratio should remain in the range of 30% to 50% to avail a home loan.
If it is more than that, your home loan application stands a chance of rejection. Keep it below 50% to increase your chances of approval.
Also, make sure to utilise the EMI calculator and estimate your monthly payments, which should fall well within your repayment capacity.
- Applying for a home loan on a property with disputed ownership
Lenders verify the property’s ownership status, resale value and such other parameters while reviewing your application. They also prefer to sanction the loan for residential houses with a considerable resale value and verified builders or developers. Selecting a credible property with builder’s reputation helps in a quick loan approval.
Eliminate these reasons before going for a home loan online apply reduces the chances of application rejection. Also, be ready with the list of all the documents you need for a home loan and apply for the same to receive approval at the earliest and purchase your new house.