A good credit score certainly benefits your home loan application and can boost your approval chances. However, it is important to note that it is not the only parameter a lender uses to judge your eligibility. Various other factors impact your application too. Here are some reasons 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 on your income and that it 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, it is also important to be employed when you borrow a loan. If you are unemployed, you don’t have a regular income, 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, it could cause your application to be 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 applying to maximize your approval chances.
If your job profile doesn’t match the lender’s terms
Lenders may scrutinize your job profile and your employer before approving your loan. In many cases, lenders also have certain organizations on their priority list. If your organization falls under this list, you will likely have a better chance of receiving the loan. However, sometimes, a lender might view your job as high-risk. For example, if your job risks 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 primary applicant’s repayment obligation. 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 you’re a guarantor for and accordingly time your loan application.
Some important parameters can affect your loan sanction apart from your credit score. To check your eligibility, you can always use a Home Loan Eligibility Calculator before you apply. This will indicate not only whether you are eligible but it will also tell you the amount that you qualify for.
