What is it that drives home buyers to opt for a Home Loan? Perhaps, it’s the convenient application process that requires minimum paperwork. It might also be the necessity to conserve savings and fund the purchase with a debt amount that can be relatively effortless to repay.
But, contrary to what veteran applicants might tell you, procuring a Home Loan can be both easy and laborious. There can be issues with the application process, sanction, and repayment that can result in the rejection of your loan proposal.
Given below are some of the common problems faced by loan applicants. However, solutions to these problems have also been mentioned so that you adopt quick countermeasures to avoid rejection.
1. Failure to Meet Requirements
This might sound disappointing, but a lender might reject your loan application in the initial stages itself. This usually happens when the lender’s requirements aren’t properly addressed or your documents do not fulfill their criteria. Home Loan documents required by the lender usually include property papers, employment details, and personal information such as valid proof of identification, address proof, and date of birth.
Apart from these, you’ll also need to submit proof of nationality and income statements. Failure to submit these relevant documents will automatically lead to the rejection of your loan application.
When you’re submitting documents, remember that furnishing fraudulent information will have a negative impact on your candidacy. Not only will you be shown the door if lenders find out about illegitimate submissions, but you’ll also be blacklisted as a fraud.
The best way to get your loan amount sanctioned would be to keep all your original documents ready and submit them to the lender on time. Registering yourself with verifiable documents will ensure that you pass the scrutinisation test effortlessly.
2. When You’re Not Given What You Seek
The loan amount you’ve requested for will only be sanctioned if you’re capable of repaying it on time. This is determined by the financial track record you’ve maintained over the years. Once you submit your loan application to the lender, your credit score will be dug up, scrutinized, and evaluated to adjudge if you can repay the loan before the tenure expires.
Your credit score will contain details such as debt repayment history, timely credit card payment, background details of loans taken in the past, bounced checks, bank balance, employment history, the stability of your job, liabilities, the number of dependents, existing loans, and scope of extra income in the future.
If these details aren’t up to par, your application will most likely be rejected. To avoid such refusals, you can ask a family member to sign up as a co-borrower, because higher the income, higher is the loan amount sanctioned. Another way to ensure loan approval would be placing additional securities like bonds, mutual funds, and insurance policies as collateral.
3. The Charges of Processing
It’s not just the rate of interest lenders will be charging when it comes to Home Loans. There’s a processing fee that lenders levy when you submit your application. This fee is usually 0.25-1% of the requested loan amount and, in most cases, non-refundable.
Don’t be under the impression that the lender will return the processing fee within the loan tenure if they don’t give anything in writing. Getting an authorized document stating the fee is refundable will be the best way to guarantee that you get your money back.
4. Clash of Opinions
There can be a clash between you and the lender if the property evaluation differs by huge margins. Lenders will employ their own team of professionals to adjudge the price of your property, and might not consider your opinion valid. This can be much lower than what you’ve estimated, which can result in the lender offering a loan amount they seem fit.
This can leave you in a financial mess or might result in missing out on lucrative ventures due to lack of adequate funds. To steer clear of this situation, you can get your home evaluated by renowned professionals and submit the property appraisal report to your lender in advance.
5. The Interest Conundrum
When you apply for a Home Loan, you will be asked to choose from two types of interest rates—fixed and floating.
A fixed interest rate is one that doesn’t change according to market volatility and is much higher than a floating type. The catch here is that even if the lender offers a fixed rate, their loan policy might allow them to hike it once in a year or two.
Floating interest rates, on the other hand, are certainly lower than the fixed type but come with an element of uncertainty, mainly because of the ever changing loan market.
To avoid paying more or losing out on rate cut benefits, you must go through the fine print of the policy thoroughly. Seek assistance from financial experts if you’re unable to choose between a fixed and floating rate of interest.
6. The Down Payment
Your Home Loan will not cover the entire cost of your property and you have to pay a certain amount by yourself. This is known as down payment and is usually 15-20% of the net value of the property. The problem with a Home Loan part payment is that if the lender’s evaluation of your property is much lower than the market price, then you’ve to arrange funds to make a huge down payment. This increases the down payment amount, thereby putting more pressure on your finances.
But, as always, there is a way around this. As mentioned above, you must get your property evaluated before the lender does or you could also provide securities like provident fund, mutual funds, and shares towards down payment.
When you sign up for a Home Loan, the issues discussed above might crop up. But with advanced and strategic planning, you can avoid these problems easily. Keep in mind that with solid paperwork and a planned approach, getting your desired loan amount sanctioned isn’t a hurdle at all.
