Top Reasons for Home Loan Rejections

Top Reasons for Home Loan Rejections

When buying a home, fulfilling this purchase may require the additional assistance of a home loan. Obtaining a home loan in India is not a difficult task in itself, given how many lenders and financial institutions are willing to offer loans at lucrative interest rates.

However, there is always a chance of loan rejection for various reasons. Most people are aware that loan applications can be a long-drawn process in case additional paperwork is needed in some cases, but it is crucial to ensure that it does not end in disappointment.

Therefore, let us discuss these loan rejection reasons so that one may know better how to avoid them when getting a home loan.

Why Does a Home Loan Get Rejected?

When applying for a home loan, there are two things to remember. It takes a lot of research and serious decision-making to choose a loan that will suffice for the purchase and can be repaid as per the chosen repayment tenure.

Therefore, one needs to be ready with all the documentation required for the home loan application and understand all the home loan rejection reasons.

Low Credit Scores

One’s credit history, obtained through CIBIL (Credit Information Bureau of India Limited), is an important part of the loan process. During the application, the lender vets this report to understand the borrower’s creditworthiness so that they can disburse the loan to suitable borrowers.

Borrower’s Age

If the borrower is approaching retirement, it may be one of the reasons for the rejection of a loan application since their repayment capacity is difficult to assess. Lenders may also hesitate to offer a loan if one is employed but uncertain of their job stability. In both cases, this can be one of the home loan or even personal loan rejection reasons that one should heed.

Irregular Income

Lenders need the timely repayment of the loan through Equated Monthly Instalments (EMIs). Therefore, most lenders may not immediately offer a loan to a borrower who is unable to produce a stable source of income as it may imply one’s inability to repay the EMIs as per the schedule. But if adequate proof of income is present, the loan may be approved.

Unpaid Debts

If the borrower’s unpaid loans have been piling up over a period, it can affect their credit scores and hence, be the reason for their rejected loan application. To avoid this, always ensure that even the smallest repayments and debts are settled on time, be it a loan or a credit card bill. Cut down on unnecessary expenses if needed to fulfil these repayments.

Low Loan-to-Income Ratio

One must inform their lender of any other loans they may have taken and are still repaying. This information helps the lender gauge the borrower’s loan-to-income ratio and determine if the total of all their loans is below 50% of their monthly income. The home loan application can be rejected if this loan-to-income ratio exceeds half of one’s monthly income.

Tax Filing Issues

Filing one’s tax returns is important in getting a home loan approved. When applying for the loan, one should provide the tax receipts of the last 3 years to show that their returns have been filed. This acts as an important proof of income and also shows the borrower’s financial accountability, which can lead to better chances of obtaining a home loan.

Apart from all these reasons, inadequate documentation is another reason home loan applications get rejected. When applying for a loan, first ensure that all documents are present and, if needed, gather additional documents that may come in handy. The proof of income, be it the bank statements of the last 6 months or the income tax returns of the last 3 years, must be present during the application.

Some lenders may also be concerned about the developer’s reputation; however, this is not their primary concern if one opts for a renowned real-estate developer.

Piramal Realty has been a well-known name in the real estate industry for its quality residential developments across Mumbai and Thane.


Loan rejections may not be as common as one may think. To ensure that such an incident does not occur, make it a point to research all lending options and gather all of the required and additional documents before making an application.

If you are just starting your search for a luxury home in Mumbai or Thane, visit the official Piramal Realty website to learn more about our offerings!

Disclaimer- This article is based on the information publicly available for general use as well as reference links mentioned herein. We do not claim any responsibility regarding the genuineness of the same. The information provided herein does not, and is not intended to, constitute legal advice; instead, it is for general informational purposes only. We expressly disclaim /disown any liability, which may arise due to any decision taken by any person/s basis the article hereof. Readers should obtain separate advice with respect to any particular information provided herein.

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