Building a home for loved ones is one of the most cherished dreams of every individual as it provides a sense of comfort and makes them secure. Individuals may want to build a home from scratch or redevelop their existing property. In either case, they may need a home loan. However, the dream to step into their own house can be short-lived if the loan application gets rejected.
Home loan aspirants need to understand that a pre-approval is not an obligation on the buyer’s part to lend them the home loan. There may be existing conditions due to which a sanction may be cancelled.
There are several reasons for rejecting a home loan, such as tainted credit history, crucial information missing from the home loan application, undesirable credit history, etc. However, there are some lesser-known reasons for rejecting a home loan, especially after sanction.
- Hindrance in approvals for the project
Any construction work requires a series of approvals from various authorities. The borrower may have a pre-approval from the bank, while approval for the project may be in the pipeline.
The other authorities may include the fire department, environmental agencies and officials who carry out the feasibility study. The lender will have to reject the home loan post sanction if the other authorities don’t green light it. There may be concerns surrounding the feasibility considering existing rules and regulations or discrepancies in important information. The pre-approval will be withdrawn in either case, and the borrower won’t be sanctioned any loan.
- Refusal of the lender to fund the project
When a project is being developed, promoters bring in capital to display their commitment towards project development. They may or may not be able to fund the project sufficiently. Similarly, home buyers are required to deposit the down-payment to show their commitment towards owning the property. If aspirants fail to fulfil the requirement, then there is a high possibility that the home loan will get rejected.
- Change in regulation and government policies
Financial institutions such as banks conduct their operations under guidelines provided by the government. Every bank or lending authority earmarks a portion of their total deposits towards lending to home loan aspirants.
Suppose there are any amendments to the government policies related to GST or other taxes which affect the real estate market. In that case, the lender may have to review the approval granted earlier, as they are required to keep their operations in line with the policies. In some cases, banks may even decide to go back on the approval of home loans to keep the economic conditions in check.
- Changes in the borrower dynamics
Pre-approvals of home loans are based on factors such as the applicant’s employment history, credit history, and income levels. If there is an unfortunate change in these factors, the bank will re-evaluate the application. When a drastic change happens, there are chances of a home loan being rejected. For example, it may be so that the applicant’s company suffers a huge loss and subsequently cuts down the compensation. This may affect the repayment ability of the applicant. The lender will have to reject the application in such a case as they cannot compromise on the repayment.
Hence, it is critical for home loan applicants to thoroughly check all the factors involved and evaluate their circumstances. The applicants can use the online home loan EMI calculator to analyse the expected EMI amount and whether it fits their budget. The home loan EMI calculator is easy to use and makes the entire process hassle-free and smooth!
