Top Three Ways to Avoid Being Denied Your Mortgage
After finally finding the Real Estate in India for purchase you are excited to fill in the mortgage loan application and submit it to respective bank, but you were suddenly told that your loan application is rejected or mortgage is denied. Nothing can be more frustrating that seeing your dreams and hopes shattering due to rejected mortgage loan application. So, it is necessary that you equip yourself with right knowledge and skills to get a pre-approval for your mortgage even before searching and finding a real estate property in India. Below you will come across with three common reasons why the mortgage applications get a denial and what you need to do in order to avoid such mortgage denials.
Deprived Credit Records
No matter, whether you are having a poor credit report or too low credit score in CIBIL, a poor CIBIL rating or credit score can potentially lead to denial of a mortgage application. Credit history is hampered and your CIBIL becomes worst when you delay your payments against any loan or credit card bills and more.
It is extremely important that you review your credit history and reports carefully as there may be errors in the reports due to which you are having poor CIBIL score. Any incorrect information can be corrected and you need to follow the instructions of the respective bureau and request them for correction. This will help you to improve your CIBIL score and getting pre-approval for your mortgage would become easier. If you see that the report is correct, then you need to take some initiatives to improvise the situation prior to applying for the mortgage loan.
If you have any credit card bills, ensure to pay them off immediately and if there are any late payments that are more than 30 days or less on report, you need to approach the creditor and ask them to remove from the report. Many creditors will happily remove it for their long term customers and especially if you are not a habitual offender. You may also file a review at credit bureau for the late payments and creditors need to respond to it within 30 days and confirm the late payment and if they don’t respond it would be removed automatically from your CIBIL record.
So, the solid way to improvise your credit score and rating is by using the credits responsibly. Pay off all bills on time and regularly and allow the time to do the healing for you.
Soaring Debt to Income Ratio
Before approving a mortgage application, most of the banks usually calculate the debt to income ratio to qualify the applicants. This calculation is basically done by adding all the monthly debt payments and the anticipated mortgage payments. The total is divided by monthly gross income and then multiplying it by 100 to get a lump sum percentage. If the ratio is low, then it signifies that the applicant is using his/her credit sensibly.
According to banks, 43% debt to income ratio is needed to qualify for the mortgage loan. But this is the highest percentage, while the lowest which they prefer is 36% only. They also prefer not more than 28% of monthly income to go higher than the anticipated mortgage payment. If the ratio is at 43%, ensure to pay off all personal loans and refinance the auto loans and pay off the credit card debts to qualify and bring the ratio to 28% to easily qualify for mortgage to buy India Property. This is the full proof method to improvise the debt to income ratio and qualify for the mortgage loan easily.
Employment and Income
All lenders and banks would definitely ask you about your employment status and monthly income that you earn. This is to confirm if you can pay back the mortgage loan or not. If you have several job hopping and huge gaps between employments, you can easily get denied for a mortgage loan based on your employment history. Banks and lenders prefer to see at least two years of consistent employment to qualify you for mortgage loan to buy Real Estate in India. Self employed applicants are required to proof at least two years of verifiable income and they need to know that lenders will also check the adjusted income for those that are self-employed applicants. So, if you are taking huge number of business deductions to minimize the taxes can hamper you when applying for mortgage loan.
The best way is to avoid the gaps in employments and also have a verifiable income. Lenders will always check the bank accounts to help them find the income verification process and also check the patterns of irresponsible financial behaviour like overdraft.
So, these were the three things which can reject your mortgage loan application in Real Estate Market in India 2020 and the methods that were mentioned here must be taken care of to avoid such denial and complications.
