Individuals applying for a home loan get upset when their applications are turned down. Of course, there are reasons for the same, but they are not adequately conveyed to the individual.
The agent interacting with the individual needs to be more proactive about it and let the individual know upfront what could go wrong with his home loan application. Here, we take a look at some of the reasons why individuals may be unsuccessful in applying for a home loan.
Area of the flat
HFCs (housing finance companies) generally have specific norms with respect to a minimum area of the flat. For example, one HFC has a norm of giving a home loan only if the built-up area of the flat is at least 400 square feet. Of course the 'minimum area' prerequisite will vary across HFCs. You need to ensure that your home meets the minimum area requirement while applying for the loan or alternatively look for an HFC that gives a loan that fulfills your criterion.
Financial profile of the individual
The individual's financial profile is an important consideration for HFCs before they lend money to him. For example, an HFC may require that an individual have a minimum income, of say, Rs 8,000 per month, to qualify for a home loan. In most cases the individual will also need to furnish a guarantor's signature. Many HFCs also decline loans to individuals who do not have a fixed and certain source of income. Another aspect that HFCs scrutinise is the credit history of the individual in terms of bounced cheques and loan defaults to cite a few parameters.
Personal profile of the individual
HFCs also take into account the personal history of an individual. For example, an HFC will want to look at the number of dependants an individual has before clearing the loan.
This is done in order to ascertain the repayment capability of the individual. A higher number of dependants implies lower repayment capacity. Similarly, an HFC will also run a check on his savings habits. This they will do by way of asking for say, the last 6 months' savings account statement from the individual. The balance should be such as to ensure that the individual is able to honour his EMI commitments.
Individual's age
If the property is co-owned, then the co-owner cannot be a minor. Similarly, the co-owner cannot be above a certain age limit. The age limits have been set to minimise ownership disputes. Also, the age limit will affect the tenure of the home loan in some cases and in effect, the EMIs too.
Lets take an HFC that has an 80-year age limit for the co-applicant. If the applicant is 40 years old and the co-applicant is 70 years old, then the home loan will be sanctioned for a maximum period of 10 years (80 years minus 70 years). Likewise the applicant's retirement age is also considered.
For example, if the applicant is 55 years of age and is set to retire at 60 years, then the maximum loan tenure available will be 5 years.
Legal/technical discrepancies
HFCs are also likely to decline the loan in case of a legal/technical discrepancy. For example, if the title deed to the property is not clear, then a loan will not be granted. Similarly, individuals should be able to produce post-1991 historical agreements (also referred to as link agreements) for the property alongwith the stamp duty receipt and the registration receipt.
Age and location of property
The age of the property can be important in case of resale. Home loans on resale properties are sanctioned only if they are less than 50 years old. Likewise, certain areas are also marked as being 'negative' in the books of some HFCs. If an individual intends to buy a property in such an area, then he will not be granted a loan by the HFC.
Similarly, the property also has to fall within the geographical limits as defined by the HFC for it to sanction the home loan. For example, the geographical limits defined by IDBI Bank for Mumbai are Churchgate-Virar and CST-Kalyan.
Of course, there are a few negative areas defined by IDBI Bank, as explained before, which fall within the said geographical limits.
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