Purchasing a new home is much more than just deciding the right house. Whether you take a home loan or use your savings, this decision is like one of the most important financial transactions of your life. Managing the financial resources for this transaction has a direct effect on all your financial commitments in the future. Due to easy accessibility of home loans, they have become the most favoured way to buy a house these days.
As the tenure of home loans consists of a long repayment period, going up to 30 years, the lenders have developed a well-structured and disciplined process to approve a loan. Before the approval, they ensure that you are financially capable of repaying your home loans through a stringent process. Due to the nature of this process, your home loan application may get rejected, leading to a great disappointment for you. However, getting a rejection on a home loan application does not mean the end of the world. You should adopt an objective approach to handle the situation in order to rectify it. Here are the steps to follow when your housing loan gets rejected,
Reducing the Loan Amount
The simplest thing to do after home loan rejection is decreasing the loan amount. Applying for a larger amount than actual financial capacities is of the most frequent reasons why lenders reject the loan applications. If you come to know that your application is rejected due to this reason, you can decrease the amount so that the lenders get assurance that you will be able to repay your home loan.
Making a Large Down Payment
Large down payments straight-way increase the chances of getting home loan applications approved. Lending organisations take larger down-payments as a lesser risk with a lower loan to value ratio. Hence they are more likely to approve such applications.
Clearing the Existing Debts
Your chances of getting approval on home loan application reduce when you already have multiple loans borrowed. Lenders see a high debt to income ratio as a red flag and chances of defaulting on the EMIs of home loan. So, clear at least a few of the previous loans before applying for a home loan for the second time.
Applying with a Co-Applicant or Guarantor
When your credit history is not as per the standards set by the lender, taking the help of a co-applicant or guarantor having stable income can increase your chances of getting a home loan approved. But remember, the credit score of the co-applicant or guarantor should be good to improve the chances of approval. Lastly, you have to inform about the risk involved before asking someone to be your guarantor or co-applicant.
Finding out the Reason Behind the Rejection
Generally, the applicants get an email or a letter when any bank or financial institution rejects his/her loan application. These emails or letters do not specify the reasons why the lender has rejected the application. But, you can always directly approach them to find out the exact reason. Knowing the reason is crucial as it will enable you to prepare for your next attempt to apply for a home loan.Getting your home loan application approved by the lenders is largely in your hands. If your home loan documentation is proper and credit score is good, generally you are considered as eligible for the loan. However, if application is rejected, you can always take help of the above steps and do better in your next attempt.