Loans

5 Reasons Why Sanctioned Home Loan is Rejected

Home Loan

Are you looking to buy your dream home? Have decided the home of your dream? Surely you would go for some home loan as paying off such big much amount of money from our saving is a big thing. We always feel that we can get the home loan easily if we fulfill certain criteria, but we must be aware that sanctioned home loan can also be rejected due to certain reasons. If you think that sanction letter of home loan is a kind of bidding agreement on bank then you are wrong. You can look for the below reason by which sanctioned loans can also be rejected:

1.) Property Valuation: Are you aware of the fact that bank conducts its own valuation of the property irrespective to the market price of property. This technical valuation usually happens after the loan gets sanctioned.

While the process is under valuation, bank considers the age and condition of the building. It might be the case that you are earning higher salary and you are eligible for higher loan amount but bank may downsize or reject your loan depending on the valuation of the property according to them. So, to be on safer side, you must go with reputed and big builders.

2.) Processing fee cheque bounced: This is a very serious matter according to bank. If it gets bounced due to any reason then bank will reject your loan right away. This is the first step of trust building between you and bank. So, if you want to build this relation healthy then you must keep enough money in your account before issuing the processing fee cheque.

3.) Investigation Report: When we apply for any kind of loan; they take various details from us. As they do their home work on the basis of these details provided by us. They check our credit score, financial assets etc. Banks have field investigation officers who perform background check on the basis of details provided by us via personal visit or call. Sometimes it happens that the investigation report reaches to bank after the sanction of the loan. If bank found any sort of discrepancy in the investigator’s report against your details then bank might cancel your loan post sanctioning. The reasons can be numerous like: lack of response from the given contact numbers, non-availability of the person at the given address, a negative report provided by a neighbor, the officer coming to know about any hidden loans or debts on you, and so on. To avoid this, always share the correct personal and financial credentials with the bank.

4.) Legal issues in property documents: Bank checks the property documents submitted by you keenly. They check all the past records of the property to rule out any fraud. So if your property has any unsettled legal issues or has an unclear property title, banks are more likely to reject your home loan application.
5.) Property in Negative Listed Area: Banks have their own list of areas where they never sanction loan and they call it as negative listing area. Some areas fall under this category because of any land related issues, poor infrastructure, an area with political disruptions or issues, a natural calamity-prone area etc. No bank will invest its money in a property that is liable to offer negative returns. Give due importance to the location of your property. Make sure your property does not fall in any area blacklisted by your lending bank.
Always remember that a sanction letter is a formal confirmation stating that the bank agrees to consider you for the sanctioned amount. But it does not mean that bank is offering you a home loan. The loan will be finally disbursed after bank verifies all the legal documents along with the valuation of the property. So make sure you have done your work correctly.

Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of Finaacle.com - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

1 Comment

Join The Discussion

%d bloggers like this: