Imagine a situation where you just got to know that your home loan application has been rejected. What now? Before you whip out a playlist of sad songs, you need to know this is not the end of the world. Or the end of getting your dream home.
There are several reasons as to why your home loan application could have been rejected. But that does not mean you cannot apply for it again. Instead of crying over spilled milk, let’s now look at some of the measures that can be implemented in order to ensure that your home loan application does not get rejected the second time.
Do not hesitate to ask
When a loan gets rejected, you will get a letter from the bank or financial institution about it. More often than not, the reason for rejection of the loan will be mentioned in the letter.
If the letter does not contain any details about the reason for rejection of the loan, it is important to contact the bank/lender and find out the reason for the rejection. Knowing the reason for loan rejection will come in handy when reapplying for the loan.
Mind the loan amount
Have you been a little too greedy and demanded too much? Every lender checks your income before granting you a loan, to ensure that your income is sufficient to repay the loan installments every month. If the numbers do not tally, the lender has every right to reject your home loan application.
Cases like this can be easily fixed. All you have to do is reduce the loan amount to give the lender enough confidence that you can repay the loan.
Don’t have too many loans
Having too many loans simultaneously increases your monthly payment obligations. The percentage of an individual’s annual gross income that is used to pay debts is known as the debt-to-income ratio. Lenders are usually drawn towards applicants with a lower debt-to-income ratio. This is because such persons do not have too many loan commitments and are able to pay off the loan without any hassle.
If the reason for rejection of your loan was a high debt-to-income ratio, reduce it by paying off a few loans before applying for a home loan again.
Fix your credit score
More often than not, this is the main reason for the rejection of home loan applications. Lenders look at your credit score and credit report to ascertain your creditworthiness. A low credit score will mean that you are not good at handling debts. If you have a low credit score, it is important to fix it as soon as you can. Read our post on how you can crawl out of a bad credit report for more tips.
Instead of sulking around about the rejection of your home loan application, take charge and fix those mistakes. This way, you can ensure that it won’t happen again. Fixing these mistakes will not only help you get an approved home loan but will also have a positive impact on your credit report.