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NEW DELHI: Lenders primarily check for two things before approving a loan – credit history and score, and income. If either of these don’t meet the lender’s minimum requirements, your loan application can be rejected.

Lenders also look for steady employment and income records. Factors such as age, nationality, and even educational qualification could have an implication on loan approval.

Inaccuracies in your application, especially in name, age, address, etc., make it difficult for banks to generate necessary information about you and can lead to the application being rejected.

Adhil Shetty, CEO, Bankbazaar, explains some lesser-known factors that could cause your home loan application to be rejected.

AGE AND REMAINING YEARS OF SERVICE

The eligibility for a home loan is directly related to the loan tenor. If you are younger, you have a longer time to repay your loan, you can have a loan with a longer tenor and lower equated monthly instalment (EMI). However, if you are older and due for retirement soon, then you will get a much shorter tenor for your loan as the loan needs to close before your retirement.

It can push up your EMIs significantly. “Moreover, lenders require that your EMIs are below a certain threshold – typically 50% of your monthly income. If the resultant EMI is higher than what is acceptable to the lender, then your loan application may be rejected," said Shetty.

LOW VALUATION OF PROPERTY

Banks typically offer up to 85% of the property value as a loan. Irrespective of the market price, banks undertake their property valuation, which takes several factors into account such as the age of the building, the condition and quality of construction, the location of the property, etc. “Even if you are eligible for a higher loan amount based on your income, the bank may downsize or reject your loan if it finds that the property has a lower valuation," said Shetty.

UNAPPROVED PROPERTY OR BUILDER

Lenders check if the property is approved by local bodies. If it fails to adhere to specific guidelines prescribed by local authorities, the lender may reject the loan. Similarly, the builders are also well scrutinized by banks before financing their projects. “If you opt for a property by a builder, not approved or blacklisted by the bank, chances of getting a home loan approved are slim even if the property has been approved," said Shetty.

AGE OF THE PROPERTY

When you take a home loan, your property is held as collateral by the bank. In case the property is very old, the lenders may also evaluate the probability of structural collapse, in addition to their legal and technical investigations. In some instances, the condition of the property or the government norms surrounding the old property may not allow the sanction of a loan against it.

(Do you have personal finance queries? Send them to mintmoney@livemint.com and get them answered by industry experts)

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