5 Common Reasons for Rejection of your Home Loan Application - Home Loan Stories - Kotak Bank
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26 SEPTEMBER, 2019

Getting a home loan has become easier than it was before. Banks and other lending institutions give quick home loan approval to eligible customers. At the same time, a frequent concern by loan applicants is that their application got rejected. There are various reasons because of which your home loan application may get rejected. Let’s find out what these are.

Credit score not good enough

Your credit score represents your likelihood to repay the debts. Usually, if your credit score is above 650, then you are considered as an eligible home loan applicant by banks and other lending institutions.

A credit score below 650 is considered to be not good enough, which is an indicator that you may not be punctual about repaying your liabilities. Hence, there is a high chance that financial organisations may reject your home loan application if you have a low credit score.

Credit report shows risky behaviour

Your credit score captures your broad behaviour on repayment of loans. However, at times, despite having a good credit score, there could be some other elements in your credit report that have an impact on a bank’s decision. Your credit report lists all of your credit accounts (e.g. credit card bills, etc.) and previous loans. The details include not just your repayment history but also the number and frequency of inquiries you have made to get a loan. A high number of loan inquiries suggest  that you are constantly in need to borrow money which is a negative signal for a lender. Financial institutions mostly approve your home loan application when your credit report shows a positive trend behaviour and no defaults. However, risky behaviour reflected in a credit report decreases the chance of getting a home loan approved.

Improper Documentation

Documentation is a very crucial part of the home loan process. While applying for a home loan, you must provide all relevant documents. Before the loan gets approved the lender also conducts a verification of the property and related documents. The chances of rejection of the application increase significantly when the banks/financial institutions find out that the documents are not genuine or you have provided false information or if the home loan documentation is incomplete.

Unstable employment

Your employment plays a critical role in getting your home loan application approved. Financial institutions examine every detail of your employment such as your income, duration with the current employer, profile of your company, your work profile, etc. The chances of getting a home loan approved decrease if the bank or financial institution does not find your work profile satisfactory.

Accordingly, the chances of getting approval on home loan application are low in case of people who constantly change their jobs. This is because constant job-hopping is taken as a sign of unstable employment and which in turn could lead to inability to repay the loan.  

Having multiple loans at the same time

Having multiple high-interest loans or delay in the loan repayment also increase the chances of the home loan application getting rejected.

So how do you prevent this from happening?

It is disappointing to get home loan application rejected, especially when you are counting on it to buy your dream house. Whether it is improper documentation or bad credit score, there are lessons in every reason mentioned above that can help you to get your home loan application approved.
Let’s check out how these lessons can help you,

Improving credit score

Maintaining a good track record by timely repayments eventually enhances your credit score as well as chances of getting the home loan application approved.

Making credit reports error-free

Despite keeping a clean credit history, your credit reports may contain some errors, which can negatively affect your chances of home loan approval. In order to avoid this, you have to periodically check your credit reports and rectify the errors if needed.

Being meticulous about documents

As mentioned above, documentation is like the first step to get home loan approval. So, research about the documents required and obtain everything before applying for a loan. Our website provides you with detailed information about documents needed for the home loan process.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.