FAQ – Home Loans

WHY DO HOME LOANS GET REJECTED?

Before we give reasons for home loan Application rejection first let us put this simple question to you- Who is a Home Loan Borrower? A home loan borrower is simply a person who has dreamt of having his own home, have planned for either buying or building it and did sufficient preparations to fulfill his dreams. But in the excitement of having the dream come true, some mistakes on your part can ruin your dreams.

Let us see some mistakes that can make the lender reject your home loan application:

  • Lack of Proper Documents: Documentation is the most important part in any loan processing. Submitting incomplete documents will make your application liable to rejection by the lenders.
  • Credit Score: A poor credit score is another important factor for rejection of your loan application. A poor credit score puts lenders into doubt regarding your creditworthiness.
  • Lack of income: If your income does not match the lender’s criteria your loan application will get rejected straightaway. Apart from this if you quit/lose your job midway in your loan application process your loan gets rejected even if it has passed initial approval stages.
  • Existing loans: If you already have loans running, lenders would reject your loan application on the ground of higher liability in comparison to income.
  • Property Issues: Property acts as a collateral in home loans. Therefore one has to submit all property related documents to the concerned lender for processing of home loan. Now suppose the property is under any legal issues or the property you have chosen does not adhere to the guidelines of the relevant authorities, lenders would hesitate to approve the loan application.
  • Frequent job changes: Changing jobs frequently leads to instability of income. Lenders will become uncertain about your income. Hence they may not approve your loan application.
  • Age of the applicant: If you are approaching your age of retirement, there are high chances your application for loan will get rejected as you will not have sufficient time to repay loan.
  • Being a guarantor to a defaulter: If you have been a guarantor to a loan defaulter, it will severely impact your impression before the lender. Therefore avoid being guarantor to anyone unless you are sure of the repayment capacity of the borrower.

FREQUENTLY ASKED QUESTIONS

  1. What is a Home Loan?

A home loan is an amount lender offer to purchase/construct/renovate/extend one’s property at a predetermined interest rate and repayment tenure. The borrower then repays the amount through scheduled EMIs, while the lender retains the ownership of the property till the entire amount is repaid.

2. What are the different types of home loans available in India?

The different types of home loans available in India are:

  • Home purchase loan
  • Home construction loan
  • Home renovation/extension loan
  • Plot purchase loan
  • Home loan balance transfer and top up
  • Loans under the Pradhanmantri Awas Yojana.

3. What is the minimum salary or income required to avail a home loan?

The minimum salary required is Rs.10,000/- monthly (subject to the lender’s policy).

4. What are the property documents required to avail a home loan?

Following documents are required for applying for loan:

  • A detailed estimate of the cost of construction of the house(in case of home loan for construction).
  • Registered Sale Deed, Allotment Letter or Stamped Agreement of Sale with the Builder (original document)
  • Occupancy Certificate (in case of ready-to-move-in properties)
  • Receipts of the advance payments made towards the purchase of flat (original document).
  • An approved copy of the building plan (key plan/floor plan in case of purchase of flats).
  • Original of the land tax paid receipt and possession certificate as issued by the revenue authority.
  • Payment receipt or bank account statements showing payments made to the builder or seller.

5. At what interest rates can I get a home loan?

Home loans usually starts around 6.65% and varies from lenders to lender.

6. What is the maximum loan amount that I can get in a home loan?

Maximum loan amount varies from lenders to lenders. The maximum amount you can get is Rs. 10cr (depending upon your profile, job, income, credit history and the lender’s policies).

7. How long does it takes to get a home loan sanctioned?

As soon as the documents required are submitted and verified, the processing of application begins. The whole procedure usually takes anywhere between 10 to 30days.

8. If I submit my property documents, when will I get it back?

Since property documents are kept as collateral, lenders return all your property documents once the entire home loan amount is repaid and the loan on your name is closed.

9.What factors determine my home loan eligibility?

Following are the factors that affect your home loan eligibility:

  • Age
  • Income
  • Employment status
  • Credit Score
  • Property Value

10. What tax benefits can I get if I avail for a home loan?

You can get tax benefit on the principal amount under section 80C of Income Tax Act. You can claim up to Rs 1,50,000/- under this section. You can also get tax benefit on the interest paid under section 24 of the Income Tax Act.

11.When does the loan repayment period starts?

Loan repayment period starts immediately after the entire loan amount has been disbursed. If the loan is taken for construction of house, in which banks disburse partially then you have to start repaying on this partially disbursed amount.

12. Can I get a 100% home loan?

No, as per the RBI guidelines no lender in India is allowed to offer 100% financing in home loans. Lenders can at the most do financing up to 80% of the property value.