Reasons why Home Loans gets rejected

There is a lot of effort that goes into being eligible to get a Home Loan to finance your dream home. Maintaining a good credit track and repayment over the years to come to the stage of applying for a Home Loan. Even after that, loans get rejected especially Home Loan even though the credit is secured. It’s a frustrating feeling to have a loan rejected. Before you apply for another lender, analyze the reasons for rejections. 

Banks have the right to accept or reject an application for Home Loan. Banks may not issue the reason for rejection for the application to the applicant. While the applicant cannot demand for an answer or an explanation from the Lender, one must be aware of the situations where the application is rejected. Here are some of the common reasons for Home Loan rejection. 

Credit Score

A low credit score is the most common reason for Home Loan rejection. Missed EMIs, frequent loan inquiries, loan defaults, etc may have a significant impact on your credit history and thereby the score. Even if one has a substantial income stream, credit bureaus don’t take into account this factor to determine the creditworthiness of the applicant. 

Repayment capacity

An extensive background check is made by the lender whenever a Home Loan application is received. The inquiry also checks the applicant’s capacity to repay the loan and ascertain their income streams. If the background check arrives at a conclusion that it is beyond the applicant’s capacity to repay, the loan gets rejected. 


Not just Home Loans, every loan needs a set of documents to consider to grant a loan. Applying for the purpose of Home buying, documentation is extensive given the size of the loan. Additional papers include property registration, a title deed, developer consent, occupancy certificate, etc. If the submitted documents are incomplete, the lender may request to furnish the required papers. If the submitted documents are found to be fraudulent or falsified, banks will reject the application on verification. 

Lack of income Security 

As part of the background verification process, the lender even checks at the place of employment to confirm the furnished information related to employment and income. Along with that, there is also a credit check to confirm any existing loans and the repayment is made. If you are terminated or quit while the application is in process, it will by default render incapacity to income. In case you are self-employed, past Income tax returns will be accessed to confirm income security. 

Existing Loans and Repayments

When applying for a Home Loan, ensure there are no existing loans. Even if there are loans availed, make sure their repayments don’t take a major chunk of your income. The lender has the right to reject a home loan on the grounds of existing liabilities being higher than your income. If there are more EMIs being deducted every month, it will leave little room for the home loan repayment out of your income leaving the lender the decision to reject the Home Loan application. Try our EMI Calculator to check your monthly dues.

Bank’s policy

The majority of lenders including Banks and NBFCs have the right to adopt their own policies to process Home Loan applications. For example, if every aspect of the application is found right, and the location of the Property is found negative, it will prevent the bank to approve the loan application. Also, there are cases where the banks don’t provide loans for buildings older than 20 years. 

Click here to know about different types of Home Loan

In a few of the cases mentioned above, banks can reject the application without any warning. In some, the banks will talk to the applicant to get clarity on the concern. If found viable, the process will continue. Almost every lender today has their policies published online on their official sites for user information, check before applying to the lender to make sure your profile fits the bank’s policy. 

Looking to buy a House?

Owning a home is a dream for many. To financially support these dreams, Money Mango offers Home Loan in Bangalore in partnership with reputed Banks and NBFCs. With attractive interest rates, apply for multiple banks with one single application with Money Mango. Contact us today to get finance for your home. 

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