Manish Kumar


Business and Finance

Reasons Why You May be Denied for a Home Loan

The facility of housing finance is one of the most applied in India. It helps you buy or construct the home of your dream. 

If you are loan eligible, then you can get an amount in lakhs to crores to buy or build a home of your choice. 

But when it comes to the application of the home loan, not all get the approval for it. 

Yes, you need to meet your lender’s home loan eligibility and other factors to become loan ready. 

But when you have an idea of the reasons that can lead to the rejection of the home loan, you may avoid all. Read on and know more!

1. When your debt to income ratio is higher 

You may be paying your ongoing loan EMIs and credit card outstanding on time, leading to a higher credit score. But if your debt to income ratio is higher, then you may not be able to get the home loan approval. It is because a home loan is a big-ticket facility that lenders don’t award to just anyone. If you have the home loan eligibility, then only you may get the approval. Having an increased debt to income indicates that you are paying a significant part of your income towards your debts. Hence, if you are given another loan, then you may not take the burden and may default. Therefore, your application for the home loan may not be approved. A debt to income ratio of up to 40% is what is considered ideal to approve the housing finance loan application. 

2. When your guarantor is a defaulter 

Another thing that can lead to the denial of your home loan is when the person that you consider as the guarantor is a defaulter. Hence, if you get the guarantor as a defaulter, then you should go ahead with him/her. Also, if you happen to be the guarantor for a home loan, you should ensure that you do not default on your ongoing debts. 

3. Tax history 

At the time of applying for the home loan with a bank, the lenders also ask for your previous 2 years of Income Tax Returns (ITRs). If they are unsatisfied, then they may ask you to provide more documents. If your records are not proper, then the bank may reject your home loan application. It means that your home loan eligibility may not match the requirements of the lenders. 

Here’s how you can avoid the home loan rejections 

  • Add a guarantor/co-applicant to your housing loan application 

Adding a guarantor or a co-applicant to the housing finance application may improve your chances of loan approval. It is because adding the same to your loan may assure a lender that there will not be issues in the repayments. But the only thing is that the guarantor that you want to add to your loan application must have a higher cibil score. It may increase your home loan eligibility easily. 

  • Apply for the home loan via NBFCs

Compared to banks, non-banking finance companies (NBFCs) may have less stringent rules for evaluating the home loan eligibility of the applicants. Hence, you should approach them if you think your request may be turned down by a traditional bank. They may charge you with a bit higher rate of interest but may sanction the loan request. It may help you buy the home of your choice and fulfil your wish. Nonetheless, you can make time to time repayments during the tenure to make the loan affordable. This way, your home loan outstanding will reduce, and that may help you repay lower EMI + interest charges. But you should always be aware of the prepayment charges levied by the lender. 

If you have the required home loan eligibility, then your loan application may be sanctioned without issues. Since you are aware of the things that may reject the housing loan application, you can avoid all easily and get the approval super fast.