If your home loan application was rejected, it’s not the end of the road! Although a home loan rejection is highly inconvenient, there’s no reason to feel dejected. Instead, you can correct the mistakes you made earlier and be successful on your second attempt. Here are six crucial steps that will help you secure your dream home despite the rejection of your home loan application:
- Try to find out the reason for rejection
- Reduce the loan amount
- Pay off existing debts
- Make a larger down payment
- Get a Co-Applicant or Guarantor
- Check Credit Report, Evaluate & Improve It
- Is there any important paper missing
- Check If You Meet The Debt To Income Ratio
Try to Find Out the Reason for Rejection
Generally, the letter or email sent out by your lender conveying the rejection may not specify the reason. However, you can always reach out to the lender to find the exact reason for rejection. This is an important step as it will help you prepare better for the next time you apply for a home loan.
Reduce the Loan Amount
Applying for a large loan amount without adequate income to support it, is one of the most common reasons for home loan rejection. If your home loan was rejected due to this reason, you can reduce the loan amount so that the lender feels more confident in your loan repayment ability.
Pay Off Existing Debts
If you already have multiple loans, there are high chances that your home loan application was rejected for that reason. Higher debt to income ratio is seen as a red flag by most lenders as it increases the chances of defaulting on the loan payments. Hence, if you have multiple loans, make sure to clear at least a few of them before applying for a home loan. The lesser debt you have, the higher are the chances of your home loan getting approved.
Make A Larger Down Payment
Making larger down payments increases your chances of getting approval since you will end up borrowing less. Moreover, lenders will have lesser risks with a lower loan to value ratio, so they will be willing to approve a loan even without perfect credit. Also Know what is the perfect cibil score for home loan
Get A Co-Applicant or Guarantor
In case your income or credit history is not sufficient for approval, roping in a co-applicant or guarantor can improve your chances of home loan approval. However, your co-applicant or guarantor needs to have a stable income or a good credit score to improve your chances of approval. But before asking someone to be your guarantor or co-applicant make sure that they understand the risks involved.
Check Credit Report, Evaluate & Improve It
Before you apply for a home loan, make sure that you check your credit report. A low CIBIL score is one of the major factors that lead to the rejection of the home loan application. Therefore, having a clear idea of your CIBIL score will give you a fair understanding regarding whether your loan application will be approved or not. Additionally, you must also check for errors in your credit report and dispute them before applying for a home loan. A credit report error can also lead to the rejection of your home loan application.
To improve your home loan eligibility, you must boost your credit score. Higher the credit score, higher will be the chances of your home loan approval. Moreover, a high credit score can also make you eligible for a higher loan amount at a reduced rate of interest. Lastly, you must check home loan eligibility with the help of an online home loan eligibility calculator. This will reduce the rejection chances of your home loan application.
Is there any important paper missing
Make sure that you have all the required documents available with you while applying for the home loan. In case, you fail to provide any mandatory document; your home loan application may be rejected.
Check If You Meet The Debt To Income Ratio
Financial institutions will make a note of your Debt-To-Income (DTI) ratio to estimate how much of a loan amount can you borrow. Your Debt-To-Income ratio also gives the lender a clear idea of your current financial status and repayment capacity.
If you have a high Debt-To-Income ratio, it would mean that you’re using a large part of your income to pay off other debts. As a result of this, lenders may consider you as a high-risk applicant. This would significantly reduce the chances of your home loan approval. Thus, you should limit your outstanding debts before applying for a home loan.
If you follow these steps, you will most likely be just an approval away from securing the home of your dreams. A bit of financial discipline and patience is all it takes to get your home loan sanctioned.
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