A home loan process involves various steps. You need to fulfil the loan eligibility, furnish adequate documents and fill the application form accurately. Besides this, there are multiple levels at which the lender conducts checks before approving a housing loan in India. Therefore, it is not uncommon for borrowers to face problems or get stuck while applying for a home loan.

Before you apply, it will be helpful to know about the solutions to some common issues that you may face while applying for a home loan in India.

  • Home loan application rejections

One of the most common problems faced by home loan borrowers is application rejections. Many home applications are rejected at the first stage itself. There could be many reasons, like incomplete documents, inaccurate application forms, poor credit score etc. Before you apply, it is imperative that you thoroughly understand the lender’s requirement for the loan approval. You must check their home loan eligibility criteria and apply only when you meet them. Similarly, check the documentation process and credit score. If you have a low credit score or your income is not meeting the eligibility criteria, it could be better to postpone the loan application instead of facing rejection. 

  • Sanction of low home loan amount

There are various factors that the lender considers while sanctioning your loan amount like financial history, creditworthiness, debt to income ratio, existing loans, financial stability, repayment capacity etc. If your income is low, or you have an unstable job profile, they might not approve a high loan amount for you, doubting your repayment capacity. Your age is also a crucial aspect in the loan approval. If you are nearing your retirement, the lender could refuse to lend you a high amount of home loan.

If you need a high loan amount, you can opt for a joint home loan. You can also club your other income like rent or investment returns to enhance your repayment capacity and loan eligibility.

  • The dilemma of interest rates

Another common issue that borrowers face is the selection of home loan interest rates. Which is better: fixed or floating? It is crucial to make a weighted decision after considering your repayment schedule and payment plans. If you want to have a fixed EMI and budget, you can opt for a fixed interest rate. However, you must read the loan agreement carefully and inquire if the lender plans to switch it to a floating interest rate in future. On the other hand, a floating interest rate is better for long-term home loans especially, when you anticipate a fall in the interest rates. 

  • Discrepancies of property valuation

The lenders rely on legal and technical verifications to determine the value of your property. They could have their own parameters to evaluate the property and could assign a lower value than you had anticipated. This can impact your loan amount and even your home loan interest rate.

To solve this issue, you can get your property evaluated yourself before applying for a home loan to know the accurate value of your property. It is always best to take a second opinion for property valuation.

Knowing the solutions to some common issues can help you avoid them and have a smooth loan experience. So what are you waiting for? Check your eligibility and apply for a home loan today. 

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.