Applying for a home loan entails a lot of hard work, from putting together the documents needed to prove your eligibility to ensuring you have enough funds to make a down payment on your dream home. But even after you think you have done the best you could, the bank may reject your loan application on some factor that you could never imagine would thwart your chances of getting a loan. To avoid finding yourself in such situations, take a look at the possible reasons why a loan application may get rejected.

Your CIBIL score is poor

It is very important to manage your debt responsibly even before you can think of availing of a home loan. If you have a poor track record of repayments, meaning that you have slipped up on a few EMI payments when it comes to an existing personal loan or a car loan or you have accumulated huge dues on your credit cards it will reflect on your CIBIL score. A poor CIBIL score is a strong enough reason for any lender to reject your loan application right away.

Your profile does not fit into the bank’s internal policy!

When it comes to giving loans each bank has its own internal policy and set of guidelines that it follows. There might be cases when a credit profile, income of the customer or even the geographic area he lives is not agreeable with the bank’s internal policy.

A huge debt pile without a matching income

Availing debt is easy these days, with loans and credit card offers sounding too tempting to ignore. But if your prospective lender finds that you are juggling too much debt with income that is too little, it will not be willing to give you a home loan.

You have been hopping jobs too often

If you are hopping jobs every two or three months, your home loan lender may perceive this as instability and your inefficiency as a professional. Ideally, any lender would prefer that the borrower be working with an organization for a minimum of one- three years before applying for a loan.

Your current residential address is in a “negative zone”

Although banks seldom part with this information, the truth is that almost all banks have cities divided into three broad categories, the white, grey and black zone. Borrowers living in the white zone can qualify easily, those living in the grey zone may be asked to provide additional documentation and those in the black zone are considered very risky. Although such discrimination is frowned upon by RBI, such discrimination based on geographical locations is a stark truth even today.

The property of your choice is too old

Banks will not be willing to give you a home loan, if you have chosen an old building with an age of 20-30 years. The age criteria will differ from lender to lender, and you may have to put in a higher amount as down payment to get your lender to negotiate.

Your application has been rejected previously

All banks maintain a record of loan applications that have been rejected before. This information remains in their database. Even when you make a fresh application the verification checks that are conducted during your credit appraisal process will throw up your rejected loan application. If such a thing does happen with you, it’s best to discuss with your bank what went wrong back then, and how you have addressed the issue. If you are able to prove your creditworthiness and have enough credentials backing you up, the bank will definitely take a re-look at your fresh application.

So here’s what you need to do in order to ensure that your lender does not reject your application:

• Manage your debt responsibly. Make payments on time and keep your financial health in shape.
• Keep a check on your credit score by getting your credit report from CIBIL. If there are issues that need to be addressed, do so as soon as you can, in order to avoid trouble when you are taking a home loan. Your credit report should be looking good at least six months prior to when you intend to apply for a home loan.
• Before applying for a loan, get acquainted with the lending polices of the bank or housing finance company of your choice. It is very important to know if they have any restrictions regarding builder, minimum area or location.
• Get all your paperwork in order before you make an application. All the information that you provide in your loan application is verified by the bank. So it’s essential to keep your books in order.

You need to be aware of all the various aspects of taking a home loan, before you actually apply for one and knowing what can cause your application to get rejected is an important part of it.