Many factors determine the fate of a home loan application. Thus it will be better to assess your home loan eligibility prior to making a plan for purchasing a property

Credit score/report

The primary and common cause for the home loan application rejection is a poor credit score. The first step taken by lenders towards processing of any credit facility by lenders is to obtain your credit score and credit report from any credit information bureau, like CIBIL. Any default on your part in the repayment of your credit card bill or any other loan is reported by these credit information bureaus to the lender.

Any settlement with the lender with regards to any outstanding loan amount will negatively impact the credit score. Any waiver of accumulated interest by the lender on an outstanding amount to settle due amount will account for another negative aspect contributing to the rejection of a home loan eligibility. In such cases, the lender writes off such unrecovered amount in its books and reports the same. The nomenclature ‘write-off’ has a negative connotation and this may discourage the new lender from sanctioning your loan.

Not all the cases, where the lender agrees to forego any amount due to it, are treated as write-offs, though. In cases of genuine mistakes on the part of the lender, the outstanding amount is waived and the lender is supposed to report such remissions as waivers and not as write-offs.

In case the lender has reported a waiver as a write-off, you need to ensure that the lender rectifies such errors. For example, this may happen if a credit card, with fees applicable on it, was sent to you even though you may not have applied for it. In such situations, the credit card issuing company has to forgo the amount, if the person to whom such a card is issued, refuses to pay. In most cases, the lender will report remissions of such small amounts as write-offs. Although the amounts involved may be small, the prospective lender may reject your home loan application.

Your age

Lenders generally do not grant home loans, to salaried individuals who have retired and to self-employed people who have completed 65 years of age, even if adequate security is provided, in the form of other immovable property. The reason for this is that the lender is interested in getting his home loan serviced each month and is not so interested in the value of the property that is mortgaged. So, unless you have a sufficient and regular flow of income, you will not be able to get a home loan.

Earning history

Lenders generally are not willing to give home loans to people who have not completed a certain minimum number of years in employment or in business. Lenders do so, to satisfy themselves about the consistency and quantum of the applicant’s income flow. However, a prior earning history is not a strict requirement. Lenders do consider the home loan application of professionally qualified persons favorably, even if they do not have much of an earning history. The same applies to people employed in permanent posts in government departments.