Is Your Home Loan Application Rejected? 5 Things to Work on Right Away!
You envision a promising future when you apply for a home loan. Therefore, it could be disheartening to get your application rejected. But you must know that it’s not the end of the world. With a few modifications in your financial health and application process, you can ensure that it is approved the next time you apply.
Here are five things you must do after facing rejection on your home loan application.
- Identify the cause
It is vital to know the reason for home loan rejection to avoid it in future. Your loan application could be rejected for reasons like incomplete documentation, low credit score, disputed property, etc. You can consult a financial advisor to know the reason or ask the lender for the same. Most lenders are happy to help you identify the cause and guide you towards avoiding it in future.
- Improve credit score
For lenders, your credit score is a crucial factor for loan approval. A score of 700 and above is imperative for a home loan, without which they can reject the application. Therefore, you must check your credit score before applying and if needed, take steps to improve it. There are few things that you can do to improve your credit score.
Pay off all your debts including the outstanding balance of credit cards. Pay your EMIs on time and avoid any penalty or defaults on current debts. Maintain a credit utilisation ratio below 30%. Lastly, check your credit report from time to time to ensure it has no discrepancies or errors.
- Work on the repayment plan
Work to improve your repayment capacity. Choose a longer tenure or reduce your loan amount when you apply next. Moreover, you can also pay a higher down payment to increase your repayment capacity increasing your eligibility.
- Check eligibility
Your application can be rejected if you do not meet the home loan eligibility. Before re-applying, it would be best if you can enhance your eligibility. Avoid availing any other long-term loans that can lower your repayment capacity. Similarly, you should also defer switching jobs, as an unstable job profile is a red flag for the lenders. You can also reduce your loan amount or adjust your loan tenure to improve eligibility. Moreover, it might help to avail a joint home loan and pay a higher down payment to increase your eligibility.
- Verify the project
If your property is disputed or does not have a clear title, you might have to face home loan rejections. Before you re-apply, you must verify the builder and the construction project. The lender and the authorised authorities should approve both. You must verify if the building has the necessary permissions and approvals. In addition, the land on which the building is made should be undisputed and approved by the real estate authorities.
You must not re-apply for a housing loan immediately as it can adversely affect your credit score and thus chances of approvals in future. Instead, you must identify the reasons and take steps accordingly.
