Circumstances under which a home loan is denied

K. ARAVIND

 

Banks are routinely tightening checks to allow applications in line with rising mortgage rates. It is common for a bank to refuse a loan if the credit score is poor. But there are other reasons why loans are denied or loan amounts are reduced. It is a good to keep such things in mind when applying for a home loans.

 

The loan will be sanctioned by the bank only after ensuring that sufficient amount is available in the applicant’s account for other purposes after payment of EMI. Once the fixed percentage of the salary is paid as EMI, the loan will be sanctioned in such a way that the remaining amount can be utilized by the applicant for other purposes. It is generally said that the EMI of a home loan should be fixed at 35-40 per cent of the salary. If other loans such as personal loan and credit card loan are available, the applicant’s loan liability will increase. A person who is over-indebted is more likely to fail to repay the EMI of the home loan as they will have to pay 80-90 per cent of their salary as EMI with the increase in the home loan.

 

How long it has been since you started your current job is an important factor affecting loan disbursement. It is common for young people to change jobs frequently in order to get a pay rise and take advantage of new opportunities. If you have worked for four or five companies in two years, it will adversely affect your loan eligibility. If it has been three or four years since you started working for the existing company, banks will consider it as an indication of gaining career stability. Such people are more likely to have access to credit.

 

If the credit score is above 750, it is easy for individual applicants to get a loan. At the same time, if the one applies for the loan along with his or her spouse, the credit score of the spouse will also be considered by the lending institution.

 

Therefore, the past loan transactions of the life partner will determine the sanctioning of the loan. The loan application may be rejected or the loan amount reduced if the spouse has a high debt liability or a poor track record of repaying the loan.

 

The loan application may be rejected even if the apartment you intend to buy is not included in the list of bank approved plans. If you do not have sufficient documents for the house you intend to buy, the bank may not give you a loan. Loans for housing can be sanctioned only with the sufficient approval of the local self-governing bodies.