Apart from zeroing in on the project and unit you want to buy and transform into your home, your home loan application may be the most important part of your home-buying endeavour. Fortunately, most banks and housing finance companies have a streamlined process, competitive rates, and excellent products. According to a report, the value of active home loans in India was pegged at INR 25.5 lakh crore as of March 2022. This is a 13.3% year-on-year growth by value, signalling that more Indians are buying residential properties.
However, if you need more clarity about the application scrutiny process and are worried about rejection, here are some points you may want to consider.
Get the documentation in order
While this is a simple task, a number of loan applications get rejected each year due to incomplete or incorrect documentation. Gather your KYC documents, salary slips, proof of income, bank statements, and IT returns well before applying. Apart from your personal documentation, ensure that all the necessary permits and papers for the property you intend to buy are in place. For example, if you intend to buy a property in Kandivali West, you should pick a reputed and trusted builder who will provide you with clear titles and all legal permits for the construction.
Improve your credit score
Your credit score is one of the most important factors a lender will likely consider when assessing your home loan application. Let us understand what it is and how to improve it. A credit score is a three-digit number provided by a credit rating organisation like CIBIL that reflects your creditworthiness and financial hygiene. This translates into your ability to repay the loan. The higher the score, the more likely you are to secure a home loan. To settle on your credit score, the credit agency may consider several factors such as previous loan repayment history (if any), credit card repayment history, foreclosure or default etc.
Before applying for your home loan, you may want to repay and close any smaller loans, repay your credit card debt, and maintain a good repayment history for at least a year. A credit score of over 750 is most likely to secure a home loan, while anything below 600 may risk being rejected.
Avoid multiple applications
Loan shopping or applying to multiple lenders hoping to secure the loan with the best terms may end up hurting your application. When you apply with multiple lenders, there are multiple enquiries for your credit report, which could be interpreted as an attempt to secure multiple lines of credit simultaneously, thus increasing the risk to the prospective lenders. Comparing home loan products before the application is a smart move but raising a soft inquiry rather than a hard one is better for your loan application.
Personal profile
Banks and NBFCs often look into the background of the loan applicant. For example, the applicant's age is a significant factor, and your loan with a long tenure may be rejected if you are approaching retirement age. Similarly, if you switch jobs too often, your application may be deemed risky. In these cases, you may consider applying for a loan with your spouse or son/daughter if they have a more stable employment history. In some cases, lenders may also run a multi-layer background check which could include any dues or unpaid loans such as a loan from your employer, unpaid utility bills, or even unpaid loans where you may have been the guarantor.
Seller credibility
In rare cases, a home loan application can be rejected due to the seller's inability to furnish a NOC. This is particularly true in the case of the resale of properties. For example, if you plan to buy a 2 BHK property in Powai, the seller will need to provide you with a clear sale deed. The seller will also need to provide a NOC from the bank or institution that they may have taken a loan to buy the property. This makes buying pre-owned properties riskier. You may consider buying a new residential apartment in your budget from a zero-fee real estate buying platform like Blox instead.
These are some main factors that will help your home loan application process. However, if you are still concerned about picking the right home loan product or getting your application past the finish line, it may be a good idea to avail yourself of personalised credit assistance or financial advisory services.
