Home Loan Rejections and how to avoid them

Home Loan Rejection

Home Loan Rejections and how to avoid them

In today’s world, due to the increase in the prices of the property, it seems difficult to own a home just with the help of available funds that you have saved in the form of mutual funds, savings account or fixed deposit. In that case, you are left with only one option that is taking a home loan. There are many sources which provide home loans such as Banks, lending companies and Financial institutions. Banks play an important role in providing home loans at good interest rates. Different banks provide different home loan interest rates, from which one can choose what is best for him or her.

Home loans are secured loans that offer higher loan amount with lower interest rates and long tenures. To get a home loan, you need to contact your preferred lender and provide all identification, income and property related documents. After getting all the documents they do verification and then your loan gets disbursed but getting a home loan is not an easy task. As the demand for home loan is increasing, banks becoming stringent when it comes to approving home loan application therefore you must be very careful while submitting your home loan application because a small mistake can make your application get rejected.

Let us check few home loan application rejection reasons and how to avoid them:

Age Limit:

Banks look at the age of the borrower to check the borrowing potential of the applicant. The reason behind this is home loan comes with long tenure with a maximum of 30 years. Most of the people retire at the age of 60 years and it becomes very difficult for them to repay the loan for extended terms like 25-30 years. Therefore, most of the banks prefer applicants having age of 20-35 years with a stable monthly income. To avoid this situation, you can add a co-borrower that can be your children, brother or spouse with an age less than 40 years, so that banks can depend on you and your co-borrower for repayment of the loan.

Credit Score:

All lenders check your Credit/CIBIL score before approving/rejecting your loan application because the credit score shows your performance in repaying your credit card bills and past loans. It gives a clear idea to the lender about your defaults, payments and misses. A credit score less than 600 is considered as bad or poor. Before applying for a home loan, check your credit score and try to improve it. CIBIL Trans Union, Experian and Equifax are the major credit reporting agencies that provide free credit report for consumers.


Income plays an important role in approving your home loan application. If you have low income, but you applied to bigger loan amount then your application easily get rejected because you are not eligible to apply for such a big loan amount and if you have other loans, you can add a co-borrower who is gainfully employed can increase your eligibility and you can get a bigger loan amount.

Job Stability:

The application of the job hopper, who changes companies every year gets easily rejected. Banks prefer an applicant who has been there in the current job for at least 3 years. Therefore, employment stability is also an important factor to be eligible for a home loan.

Builders Reputation:

Before you purchase any property, check whether you are going with the right builder or not and find out everything authentic about the property like price, quality, facility, location, resale value. Even when a borrower is eligible, the builder and its property might not be eligible. Check whether all the documents are legal or not and property should not be more than 20 or 30 years old because some banks have strict policies that they will not offer loans for old property and they prefer properties with good resale value, clear titles and no minor rights.

There are many factors to keep in mind before applying for a home loan, maintain a favorable credit score, survey the market and provide correct information to the lender. If your application gets rejected at first instance, do not apply for two or more times thinking that you will get a loan this or that time. It will only reduce your credit worthiness showing that you are credit hungry. Hence, it is better to focus and improve your credit score before you reapply for the loan.