Are you finding it difficult to avail home loans?
December 12th, 2016
You have devoted a lot of time and efforts to pick your dream property. You have also estimated your budget – from the initial down payment to the equated monthly instalments (EMI). Now after approaching the bank for home loan, your loan application gets rejected. Wondering how and where things went wrong?
There might be several reasons. It is imperative to have a checklist and ensure it is in place in order to be better off next time around.
Let us now discuss the parameters that needs to be considered so that availing bank loan becomes hassle free and a smooth sailing journey.
• Loan eligibility of an applicant – Banks are very sceptical of individuals whose credit score is low. Applicant’s credit score is a numerical representation derived by the CBIL (Credit Information Bureau Ltd) based on your credit history; this basically reflects your financial health. Your pending dues, other loans and debts will act as deterrents to loan sanction. Unpaid dues reflect bad repayment ability of applicant and existing loan portfolio may deter the bank from further lending.
However, according to a trend report released by CIBIL, delinquency rate in retail home loans have reduced substantially as compared to what it was five years ago. The delinquency – where a customer misses payment of three EMIs, fell to 0.57% in the first quarter this calendar year from 1.46% in the year 2010.
• Job stability of an applicant
You may not consider this important but banks do believe in job stability and base worthiness of applicant on this factor. So if you have hopped too many jobs in a short span of time, you may find it difficult to obtain the loan. Sometimes loan sanction also depends on the future stability of the company you work for. If you are close to retirement or have retired, banks have a reason to doubt your capacity to repay the loan.
If you had problems/rejections with your previous loans for any reason, chances are that your home loan may get rejected again. Moreover, any discrepancy or improper documentation can lead to buyer’s disqualification by bank.
• Poor track record of the builder – If the builder has poor track record and has been in the news, it will make the banks sceptical. Therefore, it is advisable to go for a reputed developer.
It is highly probable that banks may decide not to fund the project (the one you have chosen). Sometimes, though the project gets funded the floor, which houses your unit, may not! This could possibly be due to absence of Commencement Certificate for that particular floor.
Every bank draws a credit limit beyond which it stops lending even if all your documents are in order and credit score is acceptable.
• Limitations of the Bank – Each bank defines its own geography based on its area assessment and risk appetite. Some banks prefer not to lend for under-construction projects, located on the city out skirts. In such cases it is advisable to approach those banks who are liberal.
In all likelihood purchasing a house is the biggest purchase of one’s life. Investing in a home and availing loan for it is the way forward as it is the safest method where asset appreciates while EMI is fixed. Further, it pays to be financially disciplined and repay dues on current loan without delays as your credit profile will be impacted which can take a long time to improve. Every step must be taken with extreme care towards buying a house, whether for living or investing. Do keep in mind all the above discussed criteria for a smooth and hassle free home loan approval.