10 – Things to Look Before you say HOME LOANS

If you are looking for a home loan, you should be aware of the factors that can potentially hamper your chances of getting the long yearned home loan sanctioned.
Now you must be wondering if all my documents are in place then what could be the spoilsport? Not one but there are many factors which can turn out to be dampeners.

As it is getting a home loan can be a difficult process, as banks dig deep into not just in an applicant’s financial details but also his social standing. Moreover lenders also need full evidence for proving not only an applicant’s financial capability but also the intent shown in his past dealings before approving the loan application.

Their assessment includes applicant’s income and expenditure pattern, savings history, past and current financial liabilities etc. besides stability and trustworthiness in other areas as well.

Say for example, application of individual employed in the same job for many years in a good company is likely to be processed faster than of an individual with a frequent job changes or that of a self-employed person.

In this article we have discussed those factors which are latent in nature but play a major role in a lender’s decision making process towards applicant’s home loan sanction.

1. Lack of job stability:
Lenders want to be sure that you are a low-risk customer and be assured of your ability to repay your home loan. Lack of job stability or frequent job changes implies that you are not consistent with your earnings and can be a potential risk for defaulting.

2. Carrying credit obligations:
Having large credit card dues and other loans will also have a significant impact on your home loan eligibility. Lenders determine your ability to take on additional EMI burden vis-à-vis your current net income. Larger the burden, lower the loan eligibility amount.

3. Frequent delays or defaults of Credit Card dues / EMI of loan:
Persistent delays or defaults can affect your credit rating. Defaulting on your credit card dues / loan repayments jeopardizes your ability to get loans or credit cards in future. Even a bad credit history of a co-borrower can ruin your chances of getting a loan.

4. Cheque Returns:
A small charge debited by your bank in the bank statement indicates that your bank returned a cheque issued by you. Number of such cheque returns can have a negative impact on your loan sanction. Cheque bounces, if cheques deposited by you are returned by the issuer’s bank, they will be visible in your bank statement too and again, banks have specific norms as to how many such returns are acceptable in a period of one year.

5. Number of new enquiries
Whenever you apply for a credit card or a loan, the card issuer / lender pulls your credit history from the CIBIL, which gets registered as an enquiry in your credit report. Excessive numbers of such enquiries indicates that you are “Credit Hungry” and in an urgent need of money. This makes the providers more cautious while evaluating your application.

6. Residential address on defaulter’s list:
If you are living in the same house as someone who was a loan defaulter, the chances of your loan application getting rejected are very high. The defaulter could be a relative, family member or a previous occupant. You will have tough time convincing the lender that the occupant is not related to you and in case of family member / relative, they are not dependent on you.

7. Staying Guarantor for Friends / Relatives
Always remember that you cannot withdraw your guarantee mid-way. In case your friend / relatives defaults in repaying the loan, it will severely hurt your credit history too, which means that if you need any loan or a credit card in future, your chances of getting the same could be jeopardized due to default of your friend / relative. The impact of standing a guarantor for a loan is the same as taking a loan your self.

8. Withholding facts in home loan application
It is not advisable to withheld facts from the prospective lender. In any case the banks will access to information regarding a potential loan borrower’s loans, repayment history, etc through credit bureaus such as CIBIL. It is advisable that you declare the information, to avoid the application being rejected.

9. Insufficient documents
Never apply for a loan without proper financial documentation for the lender, as it can delay your loan process or even cause the lender to reject the application.

10. Unsuitable profile
Every lender has its own set of guidelines / internal policies for sanctioning of loan. If your application falls under certain professions or income criteria or geographical area that is listed in their policy guidelines as not suitable for lending, then the chances of getting a loan is very slim, may be negligible.

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So as a home loan applicant you should take cognizance of these factors in order to deal confidently with your lender.

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