A good credit score is certainly beneficial to your home loan application and can boost your chances of approval. However, it is important to note that it is not the only parameter that a lender uses to judge your eligibility. There are various other factors that impact your application too. Here are some reasons why your home loan may get rejected even with a good credit score.
If you have a low income or are unemployed
When you borrow a home loan, it is important to ensure that you borrow a principal that is in accordance with your income and is easy to repay. Borrowing a high loan amount with a moderate income will cause your lender to question your ability to repay the loan and as a result lead to rejection. Apart from this, is also important to be employed when you borrow a loan. If you are unemployed, it indicates that you don’t have regular income and so, your application may be rejected.
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If you have a high Fixed Obligations to Income Ratio (FOIR)
The FOIR measures the amount of your income that goes towards paying debts such as EMIs of existing personal and gold loans, for example. Ideally, your FOIR must not be greater than 40%–50% to get a loan. If your FOIR exceeds this range, then it could be the cause for your application being rejected. Your lender might lose confidence in your ability to repay the home loan interest rate considering your other debts. So, if your FOIR is high, take all the appropriate measures to clear old debts before you apply to maximise your chances of approval.
If your job profile doesn’t match the lender’s terms
Lenders may scrutinise your job profile and your employer before approving your loan. In many cases, lenders also have certain organisations on their priority list. If your organisation falls under this list, you are likely to have a better chance of receiving the loan. However, in some cases a lender might view your job as high-risk. For example, if your job poses risk of loss or harm to your life, or has cyclical periods of unemployment, your lender might reject your loan application.
If you happen to be a guarantor for another loan
When you sign up to be a guarantor for someone else’s loan, you automatically share the repayment obligation with the primary applicant. So, if you apply for a fresh loan while you are a guarantor for a loan that has not been repaid, your lender may reject your application. As a result, before you apply, it is important to review the loan that you’re a guarantor for, and accordingly time your loan application.
These are some important parameters that can affect your loan sanction apart from your credit score. To check your eligibility, you can always make use of abefore you apply. This will indicate not only whether you are eligible, but it will also tell you the amount that you qualify for.