Purchasing a home is a major undertaking that takes a lot of work, time, and money. The majority of us borrow money from a bank because we are not financially prepared for such a large transaction. Home loans are secured loans that enable you to buy or renovate your ideal home without jeopardizing your savings or other regular expenses. Before approving your bank housing loan, lenders follow a rigorous approval process because home loans are more expensive and have longer terms. They perform all the check ups to make sure you can repay the loan on time and without missing any payments. As a result, it is possible that your home loan application will be denied if you fall short of the bank’s requirements. Rejected bank housing loan is pretty much common especially if the person did not meet certain requirements of the bank. It may feel discouraging if you recently applied for a loan and your application was rejected. But it’s not personal, and there could be a number of explanations for the denial.
Credit and income issues are the two main reasons why lenders reject loan applications. However, in some circumstances, additional elements might also influence the choice. Stated below are the probable cause why the bank rejected your bank housing loan.
When you apply for a loan, lenders will primarily look at your credit history and credit score. Lenders may decide that you are a borrower who is too risky to approve at this time if they notice any significant negative items on your credit report or other warning signs. Negative factors that frequently result in denials include:
Two problems are probably to blame if your lender rejects your loan application on the basis of your income. The first is that your income is below what the lender considers to be a minimal. Unfortunately, the majority of lenders don’t release this information, making it difficult to determine whether your salary is sufficient to secure loan approval. The other explanation is that you have an excessive debt-to-income ratio. Divide your total monthly debt payments by your gross monthly income to arrive at this percentage.
Another reason of a rejected bank housing loan is a low credit score. Your payments history and creditworthiness are reflected in your credit (CIBIL) score. Therefore, any lender will examine your credit score, which is available with multiple credit bureaus like CIBIL, before granting you a home loan. Lenders view a credit score of 750 or higher as favorable because it shows they can rely on you to make future repayments. Delays or defaults in loan or credit card EMI payments may have an impact on your credit score. However, if your application for a house loan is turned down because of a poor credit score, you will either not be approved or receive a loan with a high interest rate.
Those who are salaried have a higher chance of having their house loan application approved than those who are self-employed, especially those who run tiny or newly established firms. Lenders consider salaried employees to have a sense of security and stable income. However, because lenders are uncertain about a borrower’s financial situation, consistency is missing in the case of new business owners. As a result, before you submit your house loan application if you own a business, all of your paperwork (income documentation, ITRs for at least the last two years, etc.) must be in order.
When you apply for a home loan, the bank’s representative does a quick background check on your income to understand if you will be able to pay the loan amount you have asked for. However, if you have applied for a loan amount that is way beyond your repayment ability, there may be a chance that your home loan application gets rejected.
Typically, banks provide mortgages up to 90% of the value of the residence. No matter what the market price is, banks perform their own property valuations while taking a variety of criteria into account, such as location, building age and condition, construction quality, and more. Because of this, even if your salary qualifies you for a higher loan amount, the lender may deny your loan application if he learns that your property has a low value.
If your debt-to-income ratio (DTI) is higher than 30%, your home loan application may also be denied. Therefore, the lender would be hesitant to grant you a home loan if you are already making payments on other EMIs because they would take up a significant portion of your income and you might possibly stop making payments altogether. Again, a lender would learn about your prior EMI payments very quickly thanks to your CIBIL record, so maintaining a high credit score is crucial.
For any loan, including a mortgage, it’s critical to submit legitimate documentation. It is crucial for the lender to carefully review all the documents (age proof, income evidence, property records, etc.) since by granting you a home loan, he is taking the risk of lending you a sizable sum over a lengthy period of time. Lenders won’t move forward with your application if you don’t provide all of the requested documents, provide fraudulent information, or even if your signatures don’t match.
Don’t give up if your loan application is rejected. Before you reapply, verify your eligibility for the amount of the house loan you are looking for, as well as your documents and credit score. Some won’t require a lot of work, like removing a bad credit report entry. Others will need time and patience, such as developing a thin credit file. In the end, these strategies will improve your loan eligibility, which will raise your chances of obtaining approval in the future. Even while it’s easy to compare house loans provided by numerous banks, it’s still crucial to wait before making a decision. To avoid the lender rejecting your home loan application, contact a bank representative if you have any questions and fill out the application when you are certain about every detail.
On the other hand, you can have your own affordable house and lot too at Bria Homes with the guidance and assistance of the Pag-ibig housing loan. Even Filipinos with modest or intermediate incomes can afford to construct or purchase their own homes. Because of their cheap interest rates and accommodating payment periods, Pag-ibig home loans are well known in the country. For individuals wishing to make a sensible investment in a house and lot, this is a desirable choice because to their extended fixing periods and lower processing fees. When Bria purchasers reserve any Bria house and lot model in any of Bria Home’s projects countrywide, Bria Homes offers Pag-ibig financing loan as their home lending institution. For reference, here are the step by step guide in banking loan or home loan with Bria Homes.
By Noelyn Kate Cabrera