Mortgage Rejection: 5 Ways to Avoid It

Manjiri Gaikwad M

Introduction 

It happens that whenever you dream of anything in life, it’s not that easy to get it. Owning a house of your own name means the same. A lot of research is done about the current market price of the property, the record of the real estate company, the development facilities in the area of the property.

Even after all these efforts, if the mortgage of a house gets turned down then there are certain measures you should consider before applying for a house loan.

Way 1 – Good Credit Score

According to forbes.com, 17% of applicants with bad credit scores were denied mortgages in the year 2017. Due to the Covid-19 pandemic, there was a drastic and sudden change in the economy of the country. Hence, at this time it is difficult to maintain a good credit score. A credit score is nothing but a rating that is related to the repayment history, the number of accounts, and different loan types. So, it becomes important to maintain a good past history of repayment. You can check and get the report of the credit by making use of the credit bureau. There are four credit Bureau in India and they are TransUnion CIBIL, Equifax, Experian, and CRIF Highmark. Such agencies help the customers to analyze their financial status and conclude their credit score. They also help you to maintain a good credit score that increases your chances of getting a loan.

Way 2 – Steady-state of Job

In 2020, a 29 years person from Pune had applied for a home loan. He was working for a startup in an animation organization, and then switched to another job. But, due to the lockdown, there was a halt and so the bank had denied him a loan. Though he stated that the reason wasn’t aware or reasonable to him. It becomes important for a customer to maintain a steady state of job because it is to be assured to the bank that the customer is capable of repaying the loan. A Steady-state of job states a stable state of savings in the account that can bring you closer to your dream house.

Way 3 – Increase Your Income

The first thing when you think of buying a house is you should know that everything would not be that easy, you need to have a good budget. If you are looking for a good area, high lifestyle, and a proper urban city, then you must have a good income. Your income will allow the realtor to make a good and fair deal with you. Or else your loan for a house gets turned down.

Way 4 – Look at Your Budget and Then Build the Application

Whenever you are applying for a home loan, you need to check the budget. Your budget actually decides whether you can afford to live in your dream house or not. For a good budget one can follow the 28% and 36% rules. According to this rule, it states that you should not spend more than 28% of your gross monthly income on the cost of houses. And more than 36 % on a mortgage, student loans, or credit cards. But the Federal Housing Administration allows up to 31% of the gross monthly income of their customers to spend on mortgages. Hence, it is important to look and calculate your budget before actually applying for a home loan otherwise it will definitely increase your chances of turning down the home loan.

Way 5 – Able to Pay the High Down Payment

Before actually getting into the topic, let’s first see what does the term ‘high down payment’ means? So whenever you want to buy some big assets like a two-wheeler bike or four-wheeler vehicle or even a house or property. Mostly these expensive things are mostly to be sold by finance or installments. So, whenever we buy such things the amount that we pay for buying it should be high enough.

For eg. Let’s consider that if customer A is willing to buy a four-wheeler, the total price of the vehicle is supposed to be 20 lakhs. So if A wants to buy that vehicle then he’ll give a certain amount that will be considered as a down payment. That amount will not be 20 lakhs but it will be like 6 or 7 lakhs which is considered as the amount paid at the time of buying. And the remaining amount A will be paying monthly according to the interest rates. So, according to this scenario, the customer must be capable of paying the down payment. If the down payment is high then the bank may get assured that the customer would be able to pay the remaining amount monthly. If not then your chances of getting down for a loan are very high.

Conclusion

Considering all the above points and going through it one can feel the confidence of owning a house is not that difficult task. Only the thing is whenever you are applying for a loan you need to do the research accordingly about the agency where you are applying for a home loan. Then consider the above points and then apply for a loan.

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