Thursday, 20 February 2014

5 Reasons Why Banks Reject Your Home Loan

Residents who aspire to own homes for their families have probably already researched on how to secure a home loan and what to do in order to secure one. However, some borrowers know little on how to get their loans approved. Before you embark on your application for a loan, consider reviewing some of the reasons below on why banks may reject your home loan:

You used your residential address on the defaulter list

One of the reasons why you may get rejection for applying for a home loan is if you use your residential address on the defaulter list. This simply means that the person who wants to apply for a loan lives in the same house of an individual who has not paid their credit card bills on time, or in a house where someone has skipped paying loans. Details like these passed onto national credit bureaus, which could then cause your loan to reject. In order to resolve this issue, tell your contact person at the bank that the family member or friend who might have applied for the loan is not dependent on you. Remember, it is applicable if the one who may have previously applied was your family member or friend. You can also stress to your contact person if your current address had a past tenant.

You constantly switch jobs

Have you changed jobs lately? If you are one of those employees, who are found switching from one job to another, then that can be one reason why they will not approve your loan. Banks as a sign of instability as you are unable to hold a regular job. The banks usually approve loans of borrowers who employed with a specific organization for a minimum amount of time to qualify for a home loan. Banks usually approve borrowers employed with a certain company from one to three years. Therefore, if you are young and you plan to apply for a loan anytime soon, you may want to stay with your current employer for a minimum of a year or switch jobs after the loan got approval. However, for older borrowers, you may want to stay longer or for a minimum of three years.
 You lie.
While filling up your loan application, ensure that all the details you provide are correct, and be sure to declare your full income from all sources, your assets, and liabilities, along with other loans you currently have. Banks will verify all your details in your application and do background-checks to see if these details are correct. Another important tip to get your loan approved is to double-check all your documents and see if you are submitting the complete list of requirements to support your application. Details that do not match missing documents and documents that look dubious can cause delays in the processing of your application—or lead to an outright rejection of the application itself.

You want to purchase an old building
Most banks do not lend money if the house you are planning to buy is an old building, especially those that are 20-30 years old. Check the policies of each bank to confirm, as the qualifications for old buildings vary for each bank. Good advice will be to increase the down payment, as the land’s value considered in the decision. You may also want to try to go for a decreased loan amount.

You have a bad credit record

One of the most obvious causes of home loan rejection is a bad credit history. If you have unpaid loans, overdue credit card bills, or a court case about any sort of financial concern that compromises your capacity to pay your financial obligations. This might reject your loan application. However, you may also be mistaken for someone with the same name who has a bad credit history, or you may have already had cleared your past record but the records were not updated. To ensure you will have no problems with future loans, get a written clearance from the banks stating that you cleared of any past loans.

Your former rejected loan application

Nowadays, banks now keep a record of all loan applications they have rejected in the past. Once you apply for a home loan, and if the lender rejected your loan previously, they will see it in the database. To resolve this, avoid applying for a loan at a bank where your loan was rejected. It is also wise not to apply at different banks at the same time. You need to wait until your loan rejects from a bank before applying to another. You might also want to ask the bank why they rejected your home loan application if the reasons are not clear to you.

Now that you have read some of the possible reasons why your home loan may be rejected, hopefully, you can do something to minimize the risks of loan rejection and successfully secure a home loan for yourself.

Good luck!

Author Bio : MichaelVincent from Money Hero contributed the article. It is the upcoming educational and financial comparison website of Hong Kong. Compare a broad range of financial products like loans and credit cards for free


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