Common issues faced during home loan application

In such conditions, it's important to review your application thoroughly before submission. Ensure you have submitted all the right documents and meet eligibility criteria. This might increase your chance of getting a fast approval.

Non-refundable processing fee

If you apply for Home Loan, you need to pay up-front money to your lender. This up-front fee is known as a loan processing fee. Remember, this amount is non-refundable.  

In some cases, an applicant submits an incomplete application form, leading to rejection. If this happens, you may be required to pay the processing fee again.

Hence, always complete your loan application accurately and submit the needed documents along with the application form. This might reduce the chances of loan getting rejected and repayment of processing fee.

Low credit score

A low credit score is one of the most common reasons for loan rejection or unfavourable loan terms. Your credit score shows your creditworthiness and our ability to manage credit in the past. When you apply for a Home Loan, lenders rely heavily on your credit score to assess the risk involved in lending to you.

Hence, paying off outstanding debts and ensuring timely bill payments will help you build your credit score.

Restriction on down payments  

Many banks and financial institutions typically sanction up to 75% to 90% of the property value as a Home Loan. This means that the remaining 10% to 25% needs to be paid upfront by the borrower as a down payment.

If the borrower cannot arrange the down payment, it could impact their eligibility to secure the loan. Some banks may not proceed without proof of a down payment.

Lack of knowledge about the Interest rate

Another common challenge during a Home Loan application is deciding between fixed and floating interest rates. While most banks offer both options, many applicants struggle to understand the key differences between the two.

Choosing between these options depends on your financial goals and risk tolerance. The type of interest rate selected may also impact your EMI payments. For example, if you opt for a floating interest rate, and if interest rates drop, you will benefit from lower EMIs, but if they rise, your repayments will increase.

So, before you choose your loan amount or proceed with the loan application, you must collect more information about the interest rate. You can directly raise your query to the bank or do your research by visiting the bank’s website.

Ending notes

The goal of this blog is to offer you valuable insights into the common challenges you may encounter when applying for a Home Loan. Now that you are familiar with these potential issues, you can take steps to avoid them.

With the right knowledge and approach, you can understand the process and secure the best loan terms for your needs.

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