Having your home loan rejected can put a serious blow on your credit score. And as you might know, a good credit score is crucial for your financial health. Therefore, before you apply for a housing loan, you must know the dos and don’ts of doing so.
Follow the below given steps to avoid home loan rejections.
- Submit complete documents
The lender gathers all the information about you from the documents you submit. Therefore, avoid furnishing incomplete or outdated documents. It will help if you inquire about the documents required for home loan before applying. You can visit the lender’s website or contact their representative for the same.
- Check your credit score
Lenders can reject your loan application if your credit score is poor. A credit score above 700 is considered necessary to avail a home loan in India. Before you apply, ensure to check your credit score. Avoid applying for a loan if you do not meet the requisite score until your score improves. You can improve your credit score by maintaining the credit utilization ratio within 30% and paying EMIs timely. Also, check the credit report to find any discrepancy and rectify mistakes if needed.
- Taking a joint loan
Lenders consider your income and eligibility as a major check when you apply for a housing loan. If these two factors do not meet the requirement, your application is most likely to be rejected. Instead, opt for a joint loan. Lenders consider the income of co-applicants while processing your application. You can take a joint home loan with your parents, spouse and siblings. Moreover, you can club all the sources of your income like bonus, interest and rental income, if any, to increase your home loan eligibility.
- Buy the house with a reputed builder
Your application can be rejected if there are issues with your property. For example, if the builder or property is not approved or there are some legal disputes with the property’s ownership. To avoid getting your home loan rejected, you must do a background check of the house you are buying. It should be free from all legal and technical issues and should be valued according to your loan amount. Also, in case you are purchasing a resale home, ensure that the previous owner or tenant is not a defaulter.
- Ensure a stable source of income
Lenders specifically ask for your employment details to check if you have a steady source of income. If you have switched jobs or have an unstable income source, your loan application can be rejected. If you do not have a steady source of income yet, it would be better to deter applying for a loan. Facing too many rejections can adversely affect your credit report. Also, avoid applying with multiple lenders at the same time, as it reflects that you are credit hungry and it reduces your creditworthiness.
In short, make sure to submit all required accurate documents, maintain a good credit score, take a joint home loan if you want to boost your home loan eligibility. Apply for a loan when you have a stable source of income not only to increase chances of loan approval but also to have enough for your monthly expenses and any unprecedented situations.
