Buying a dream home is in itself a long process and adds to that getting a home loan is mind boggling process. It takes time, energy, lots of researching and documentation till you can finally get your home loan. Imagine what would happen to you if after all that careful work, your home loan gets rejected! We bet you will be depressed. But hey, when your home loan gets rejected, pass them on to Regrob and sit peacefully. We’ll do the rest for you.
Now allow us to guide you on what to do when your home loan gets rejected.
Get into details
The letter issued by the lender conveying loan rejection is likely to be a fuzzy in nature. Instead of sitting sadly and letting disappointment cloud to you, get moving.
Try to look for and understand what caused your loan application to get rejected. If the letter does not specify the same, speak to the concerned officials.
Do not shy away from asking questions until you understand the exact reason for not granting the loan. This will help you when you reapply. So dig deep and get it right the next time!
Lessen the loan amount
There is a good chance that if your loan application has got rejected. The reason for this is that the lender feels that your monthly income is not sufficient to pay off your dues timely.
So it is wise for you to reapply with a lower amount so that your loan application gets approved. By reducing the loan amount the debt servicing ratio can be easily corrected.
That will assure the lender about your loan repayment ability.
Clear existing debts
If you already have multiple loans to pay off, the chances of your existing monthly payment commitments getting in the way of the home loan approval are high. Because having multiple loan obligations leads to a high debt-income ratio. This means that, the debt obligations and repayment commitments at that time are more in comparison to the income. Any more debt obligations will put the lender at risk.
Paying off a couple of existing debts is the best alternative to resolve this situation. So pay off as many existing debts as you can, and then reapply.
Improve your CIBIL score
CIBIL score and CIBIL report is an indication of your intention and record at paying off dues. Lenders put a lot of trust on the CIBIL score and CIBIL report to understand your credit history and credit behavior. Delay in repayments and defaults reflect negatively on the CIBIL score. A poor score is reason enough for rejection.
In that case, obtain a copy of your CIBIL report. Ensure timely repayment of existing debts and close open issues, if any. Pay off the credit card dues. It may take a while for the reviewed scores to reflect. So start working towards it right away and approach the lender again with a higher score. Click here to read how to improve your Cibil score.
Valuation of security and project approval
The valuation aggregate is not amounting to sufficient security for the loan amount in question and that may lead to rejection.
However, you must understand that valuation amount sometimes differs from one lender to another, depending on lender policies and the third party evaluating it. In case, you are certain that the security provided is being undervalued consider checking with another lender.
So talk to another lender, find out what needs to be done and you’ll be good to go.
In case your loan application is rejected due to pending project approval, you can request your preferred home loan provider to approve the project. If that is not possible, you may look for an alternate property which is approved by them.
Adjustments and tips
The main factors at play when it comes to home loan are the loan amount, the rate of interest and the tenure. EMI’s are calculated on the basis of these factors. So in case your financial eligibility is making it difficult for you to get the loan amount you want. Then,
Follow these steps-
- Spreading the loan over a longer tenure, which can reduce the EMIs.
- Adding a guarantor or a co-applicant, who can increase the income that is considered by banks.
- If the applicant has an ongoing loan, which is of a shorter duration and higher interest, then, it is advisable to close the loan to improve the financial eligibility.
- You can search for lenders who may approve the application, although with a higher charge perceiving the risk or/and by adding a guarantor along with additional collaterals.
So, work around the problem and you will find a suitable solution for sure. If nothing works out, you can look out for a new property which can be more affordable and also check with other lenders for better home loans rates.
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