What To Do If My Home Loan Application Gets Rejected?

Owning a home is one of the significant moments of our life. A home is a pride that we feel when we own our own home.

 

Buying a home gives a sense of security but also impacts your long term financial goals. After all, not everybody can purchase a home with available cash or bank balance. This is where you need to finance your home with a home loan.

 

Here, let us understand why your loan application was rejected to proceed with the rectifications. Once you know and rectify them, it becomes easier to avail of high-value loans with easy-to-meet eligibilities.

 

Shubham Housing Development Finance Company provides loans to those who are earning cash income. All you need to check is the eligibility criteria and documents.

However, a rejection of loan application may be a result of several reasons.

· High debt-to-income ratio.
· Property value not high enough for the applied loan amount.
· Previous defaults
· No proper documents

Here are some of the reasons how to narrow that gap to boost the odds of approval when you apply for the loan.

1. Identify the Cause of the Denial

It's important to find out why your loan application was rejected. Ask the lender about why your home loan got rejected as the lender will generally be glad to give you an explanation and are required to provide certain disclosures. This will help you to reapply for a home loan.

 

2. Pay Off Any Outstanding Debts

Paying off your outstanding debts reduces your debt-to-income ratio and thereby increases your repayment capacity.

3. Mortgage A Property Of High-value

If you own several properties or planning to mortgage a property, always remember mortgage a property that has a high market value. It not only increases your chances of availing but also fetches you a high amount of Loan.

4. Build A Strong Credit Score

 

Building a credit score is a long-term initiative, and by paying bills on time you can build the score high and also increases your chances of loan application approval.

5.Lower your home loan amount

If the reason for rejection is your monthly income, then try to lower your home loan amount, this will help the lender meet the bank's prescribed norms within limits.

6. Any documents if missing

Take legal advice if any important property paper is missing. There is always a solution to a missing document. No lender wants to lose a customer. At Shubham, we always ensure to help you determine the right loan for you.

If you've any more queries, do let us know, we are here to help you.

Home Loan: Few charges you should know about

If you are planning on taking a home loan, you have two options as to where you can borrow from: a bank and a non-banking housing finance company (NBFC) like a housing finance company (HFC). Now, choosing between an HFC and a bank for a home loan depends on crucial factors like loan repayment period, processing fee, interest rate, etc.

A loan for your new house forms an essential component under this umbrella. Let’s say you have selected the bank that offers the best rate of interest. But have you looked at the other charges?

A home loan has many other components that can dent you financially, and the selection of a loan should be made only after a good comparison of all the costs.

Here are a few known home loan charges one should know before taking up a home loan:

Processing Fees: As the name suggests, this fee is collected towards the processing of your home loan application. This fee is non-refundable and is collected upfront regardless of whether your loan is sanctioned or not. Take this into account before choosing the bank you want to take the loan.

Mortgage Deed Fee: This is one of the significant changes you will have to incur while opting for a home loan. It is generally a percentage of the total home loan amount. Some banks waive off this additional cost to make the home loan look more attractive. But again, it may be subject to another set of terms and conditions.

Legal Fee: Before granting a loan, banks need to check the credibility of the borrower. They appoint lawyers to verify the legal status of their property. The fees charged by the lawyers are eventually passed on to the borrower. However, if the property you are buying is approved in advance by any institution, this fee is not applicable.

Prepayment Penalty: Paying off the loan before the end of the loan tenure is considered as pre-payment of the loan. While there are no pre-payment charges applicable on home loans with a floating rate of interest, as per Reserve Bank of India norms, lenders do charge some penalty for home loans with fixed interest rates if the borrower wants to repay the loan.

Loan Conversion Fee/Switching Fee: If you have taken up a home loan with a floating rate of interest but now want to switch to a fixed interest rate or vice versa, the bank will charge a loan-switching fee to facilitate such a request. While charges vary from bank to bank, most banks on average, cost 2 percent of the outstanding loan amount. In recent years, such switching fees are more prevalent for fixed-to-floating than the other way around.

Commitment Fee: Some banks levy a commitment fee in case the borrower does not avail the loan within a stipulated period after it is processed and sanctioned. The bank loses interest in the unpaid amount. Therefore it recovers a part of the interest from the borrower known as a commitment fee.

All banks may not charge all of the fees mentioned above. Besides these, other loan-related charges pertain to loan statements, foreclosure letters, duplicate copies of no objection certificate/no due certificate, etc.

So before you apply for a loan with any lender, make sure you go through the fine print
to catch the hidden monsters.

However, with Shubham Housing Development Finance Company, you can get your financial plan without any worries.

How to reduce the EMI of your home loan

Switching the loan to a lender offering a lower interest rate helps the borrower in the long run. Home loans are usually long-term loans, whose tenures generally range from 15 to 30 years. 

Hence, switching the loan to a lender offering a lower interest rate helps the borrower in the long run. However, note that changing the loan will not be possible in case of irregular repayments made by the borrower to the current bank.

There are several strategies that you can adopt to reduce your home loan EMI. You will have calculated the monthly repayment amount in advance with a home loan EMI calculator. You can try using a home loan EMI calculator to know the EMI if you can. 

Here’s how you can reduce your home loan EMI:

Process of the Transfer: Firstly, as a borrower, you need to close the deal with your existing bank. For this, you need to submit a letter to your current lender requesting a loan transfer. The bank will give a consent letter or a no-objection certificate (NOC) based on your request, with the details of your outstanding loan amount.

The consent letter then needs to be given to the new lender who approves the outstanding loan amount on your behalf to the old lender. Once the transaction is completed, the new lender gets hold of your property documents.

Cost-Benefit: You can choose a longer home loan tenure to lower the EMI. The monthly payment will be lower, although you will end up paying more interest on the loan for a longer tenor.

Home loan Prepayments: Prepayments are good ways to lower your EMI for a large part of your home loan tenure. Early prepayments for a chunk of the loan in the early stages will help you reduce the principal amount and save money on future interest costs.

Home Loan Balance Transfer:  In case another lender offers a lower rate of interest and improved terms and conditions, you can transfer your home loans accordingly.

However, work out the costs of repayment of the loan with the current lender and make sure that these are not higher than your projected savings due to the new lender’s lower interest rate. The lower interest rate will automatically equate to a lower EMI.

Down Payment: Make a higher down payment to lower the principal amount, and hence your EMI amount will be reduced since as you lower the principal amount, the lower will be the interest that you have to pay. It will help you save more money in the long run.

There are few non-banking financial companies such as Bajaj Finserv, Shubham Housing Development Finance Company, Aadhar Housing, etc. that provide EMI at a lower interest rate. If you have any queries, kindly let us know in the comment section below.