You’ve found that perfect property and zeroed in on the best lender for your Home Loan. But just when you thought that the sanctioning of your loan meant that you’re almost through to its disbursal, the application gets cancelled. This is definitely a situation that no Home Loan seeker wants to be in.
Processing a Home Loan isn’t as easy as advertisements make it seem. While sanctioning of the loan is an important milestone in the loan business, it doesn’t guarantee a loan disbursal. Here are a couple of reasons why your loan sanction may have been cancelled.
Low Property Value
Most financial institutions offer a loan upto 80-90% of the estimated property value. The market price for the property is different from the value the banks place it under. The technical evaluation of the property happens post loan sanction. This means that your application can either get rejected, or the loan amount downsized, if the property is devalued. Factors like the condition of the building, locality, age of the building, and its developer influence the final value of the property.
Negative Investigation Report
Once you submit the documents required for Home Loan, banks assign field officers to run a thorough background check on your credibility, repayment capacity, and income stability. A lack of response from the registered number, unavailability of the person mentioned as guarantor, a bad credit history, or misinformation from neighbours during background checks can work against you.
Property Under Legal Dispute
Chances are that your builder hasn’t divulged details about any legal disputes the property might be under. Financial institutions generally hire an expert team of legal advisors who inspect and investigate every piece of legal document before they approve them. The application can get rejected at this stage if they unearth any past documents.
Developer isn’t Funded by the Lender
Even developers go through a gruelling session of scrutiny when they seek funds from investors and from banks or NBFCs to get started on a project. If the developer you’ve selected isn’t funded by the lender you’ve approached, then chances are that your application might get cancelled. This generally happens because the financial institutions are familiar with the background and the financial history of the developer, especially if they have worked on projects in the past.
Property Listed in Depreciating Area
Financial institutions are most likely to grant a loan for a property that shows potential for good appreciation in the future. If your property is in a poorly developed area, infested by political disruptions, or prone to natural calamities, it lowers the value of the property significantly. When banks foresee a property as a liability to these causes, they are more likely to reject loan applications.
Other reasons for your application to get rejected include no interim security, lender closing down the type of loan you’ve applied for, developer with a bad reputation, and lenders suffering from losses.
The next time you apply for a Home Loan ensure that you pay special attention to these factors, so that you don’t get your application denied again. Also, calculate your EMIs and interest on housing loan using an online calculator, in order to get a fair estimate about your repayment capability. That said, read all loan and market-related documents before you sign on the dotted line.