There are two sides of a coin and likewise that everything in this universe has both pros and cons. Problems are associated with everything but we need the right solutions. Why most of the times your home loan applications are rejected Why do you get less home loan sanctioned than your expectation Why lenders assign a different value to your property Home loan problems can shatter your dream if the same is not taken care of in an apt manner. You should have sound knowledge and the right approach to financing your housing dreams. Let have an intellectual discussion on some major home loan problems and their remedies.
Most of you apply for home loans and your applications are rejected at the first go. Why is it so This is because of the discrepancy between your eligibility and lenders demands. Maybe you have submitted improper documents; your age, qualification, and income are not meeting the lender specified terms & conditions. Again there might be a chance that the lender has not been able to verify the applicant details or field investigations have not become successful.
Remedy Prior to applying for home loan, it is necessary to check your eligibility conditions thoroughly. Make use of home loan E.M.I calculator and compute your eligibility. Apply only to the bank or NBFC where you meet the eligibility criteria.
The processing fee is charged by the banks/NBFCS with every application form. The fee may vary from 0.25% to 1% of the total home loan amount. And in most of the cases, this fee is non-refundable.
Remedy If any bank claims that the processing fees can be refunded, then get that declaration legally documented. This is because if your home loan gets rejected owing to any reason, you can get back the processing fees.
Bank determines the repayment capacity of the borrower on the basis of his monthly income, running loans, unpaid loans, nature of employment, past financial history and credit card usage. Even though the lender rejects the application because of any such reasons, you still have a solution.
Remedy In the case of this type of rejection, you can enhance your eligibility for a home loan. The remedy is that you apply on a co-applicant basis for the home loan.
The discrepancy in interest rate is a major problem for both existing and new borrowers. Home loans interest rates are connected to the benchmark rate of the bank. The variation in the benchmark rate directly affects the interest rate on home loans.
Let us elucidate this with a case study
Anil Kumar, age 32, an orthopedic doctor in Delhi availed home loan from a private bank in 2011. At the time of loan granting, the Prime Lending Rate PLR was 15% and thereby home loan interest rate was 12%. In 2013 i.e. after 2 years, the PLR rate slashed 50 bps basis point, used for measuring interest rates and other percentages in finance to 14.5%. This reduced the interest rate to 11.5%.
At the same time, a new customer approached the bank for a home loan. Bank offered him the loan with a markdown of 35 bps, thereby offered him the best deal at 11% interest rate. Here we can see the variation in interest rate between existing and new borrower
A common problem faced by many home loan borrowers is a discrepancy in the valuation of the property. Banks and NBFCs have their own technical, legal and financial experts for evaluating the property value on their specific parameters. Based on the investigation, they decide the property's value, and that value may be less than what you expected. The lender would lend you what it valued only. As a result, the lender would become ready to lend you less loan amount than what you expected.
Remedy Obviously, you want to avoid this situation and in order to do so, get your property valued beforehand by a bank approved evaluator.
Generally, 10 % or tops 20% amount of the total property value is paid as down payment. This is mandatory, and if this is not paid by the borrower to the lender, then the lender refuses home loan. The problem arises when the bank assigns less value to the property, in that case, the down payment increases and that becomes an extra burden on the home buyer.
Remedy If the property is valued in advance, then you can adjust the down payment accordingly. In case, if you are falling short of money for the down payment of home loan you can make use of LIC policies, Provident Funds, and National Security Certificate also. Some banks accept these instruments for the down payment. You should check the down payment requirements of varied banks and go with the one that suits your budget or requires the lowest amount.
Some of you don provide the NOC No Objection Certificate documents and title deeds in prescribed bank format. And this result in the rejection of your home loan applications.
Home buyers, take proactive steps and solve all your home loan problems in advance. Ensure that you read the agreement & its terms and conditions thoroughly so that you can take a wise decision.Apply now at IIFL Home loans and solve all your housing problems.