Applying for a Home Loan? Tackle These 6 Problems

Are you thinking of getting a home loan but do not understand the process? Was your application turned down for some reason? Or maybe you’re having trouble deciding on a home loan interest rate. Then this article is for you. In this article, we will discuss the problems you can face while applying for a home loan and the possible remedies.

Buying a house is generally the hardest financial decision; housing loans are often the only way to support the dream of buying a new house. But unfortunately, the road to getting the loan isn’t always smooth, and the hurdles can end up eating away at your financial stability.

The Problems You Might Face:

Here is a comprehensive list of issues you might face while applying for a home loan.

1. Rejection of Application: Rejection at the very application stage is quite common with borrowers. It is mostly when your credentials do not match the eligibility criteria put forward by the lender. You can avoid going through this hassle only by double-checking the criteria set by the lender you are opting for so that you can avoid this rejection process. You can also apply to multiple institutions for a loan to improve your chances.
2. Incomplete Documents: Another reason why your application can be rejected is if the documents you have provided are not appropriate or not verifiable. Only by providing appropriate documents per the lender’s needs can your loan be approved.
3. Desired loan amount not sanctioned: One of the major problems that a home loan borrower might face is not getting the desired amount of a housing loan sanctioned by the lender. This might have multiple reasons:

• already ongoing loans,
• your low monthly income,
• poor financial history,
• the value of the property you were hoping to buy,
• your credit score, and so on.This kind of problem might also end up getting your home loan application rejected in the first place.When your credit profile is weak, the lender will not have high confidence in you. Thus, you will not get your desired loan amount. You can increase your chances of getting the desired amount of loan by providing complete, verifiable information to your lender.You can also apply for the home loan with a co-applicant who will act as a backup repayment source for the borrower. It will ultimately improve your chances of getting your desired loan amount sanctioned.
  4. Problems with interest rate: The interest rate a lender offers for the loan depends on various factors, such as: 
• your credit score,
• your job profile,
• monthly income, 
• loan duration,
• the value of the property you are opting for
• lending rate, and so on.The lending rate is the most important determining factor for house loan interest rates. It is the minimum rate a bank can lend at.Another dilemma with the interest rate is often the type of interest rate you are opting for. A floating interest rate is ideal when you are expecting interest rates to drop in the future. However, if the interest rates are predicted to increase soon, then it is ideal to opt for a fixed house loan interest rate. You can also mix fixed interest rates with floating interest rates to give yourself more options.
  5. Processing fee: A loan processing fee is an amount valued at 0.25% to 1% of the loan amount. In most cases, it is non-refundable even if your loan is not sanctioned. Read the terms of the loan documents carefully so that you can account for the amount of the processing fee deducted. Also, check if the bank refunds your processing fee. If they do, get it legally documented so that you can get it refunded safely.
  6. A discrepancy in the valuation of property: A common problem that any borrower faces while getting a home loan is the discrepancy in the valuation of the property. Each lending institution has its own financial experts who analyse the property value based on their parameters. Based on these parameters, they determine the property value, which may be less than your expectations, and thus the loan amount sanctioned.
  Property valuation depends on a series of factors, such as
• the age of the property,
• construction quality, 
• location, 
• history, etc. To avoid these problems, you must have an updated property valuation report from the property owner or a bank-approved evaluator and apply for the loan accordingly. Your application will not only have a better chance of being accepted, but your lender will also be more likely to give you the loan amount you want.
  7. Problems with down payment: Suppose you want to get a loan of INR 50 lakhs sanctioned. You may need to save INR 5-10 lakhs as a down payment. Most lenders sanction up to 80% of the property value as a housing loan, and the remaining amount has to be put down as a down payment. This down payment is substantial, which can be stressful for a borrower.If you are unable to make the down payment, your home loan application might be rejected. The only way to tackle this problem is to have the down payment money ready beforehand and a steady source to pay off the upcoming EMIs. You should also read the terms and conditions to get a proper idea of the down payment you need to make.

Final Thoughts

Buying a house is generally the most important financial decision you will make, and thus, you should have a proper idea of the above-stated problems before even applying for the loan. 

Visit the Piramal Finance website to use our services or learn more about home loans and other important financial ideas.