These days home loan interest rates are less than 7% in our country. In such a situation, if you are planning to buy a home, this may be the appropriate time to buy a house or property. But sometimes loan application can be rejected due to reasons like poor credit score or applying for more loan. If you too are going to apply for a home loan, then you should keep these 7 such things in mindwhich can cause your application to be rejected.
Longer credit tenure
Formal creditors like Banks and NBFCs usually provide loans for up to 30 years. But if you are old, then you should take a loan for a shorter period. According to the rule of many banks, loan repayment must be completed before the applicant attains the age of 75. In such a situation, if you are close to 55, then you should not apply for a home loan for more than 20 years.
Poor CIBIL score
Many times the bank refuses to give a loan due to poor credit score (CIBIL score) or lack of regular income. Apart from this, it is also seen that due to these reasons people do not get the desired amount of loan. So it is very important to maintain a good credit score.
Choose low LTV
LTV or Loan to Value ratio is the amount sanctioned by the bank against the collateral. A high loan-to-value (LTV) ratio can make it difficult for you to raise a loan. This means that in order to buy a house, you will have to keep your contribution higher. Choosing the lower LTV ratio increases the buyer’s contribution to the property. This reduces the risk of the bank. At the same time, low EMI increases loan affordability. This will increase your chances of getting a loan.
Fix Obligations to Income Ratio Excess
When we apply for a loan in the bank, the bank also looks at the Fix Obligation to Income Ratio (FOIR). This shows how much amount of loan you can pay each month. FOIR shows the percentage of the current income that your already paying for EMI, house rent, insurance policy and other payments. If the creditor incurs all these expenses up to 50% of your salary, then he can reject your loan application. Therefore, keep in mind that your FOIR remains low.
Switching jobs frequently
If you change jobs frequently, then this is not favourable for your credit application. Frequent job changes are considered a sign of an unstable career and hence giving credit to such individuals is considered a bit risky. This reduces the chances of getting credit.
Banks look at the repayment capacity of a person before issuing credit. To analyse this, banks demand Form 16 or the salary slip of the person. If his annual income does not fall within the limit set by the bank, then the application of that person is rejected.
Interestingly, no credit history can also cause trouble
Just as a bad CIBIL score can cause a loan rejection, in the same way, no credit history, in simple words, no record of taking and repaying a loan can also cause a problem. Generally, people think that if there is no loan already, the credit score will be good, but it is not the case. Banks also decide to give loans based on their ability to borrow and repay. If you have not taken any loan, then apply for a loan in the bank where you have a savings account. The bank can issue a loan after looking at the records of your savings account.