Home loans have become very common nowadays. Although there is money to buy a house, there are many benefits to taking a loan. But before you apply for a home loan, thorough research and planning is essential, especially since it is a long-term financial commitment that involves large funds.
Even if all aspects are examined in this way, there may be some obstacles in the way, such as getting a lower amount than expected, paying a lower property value or rejecting your loan application. Refusing a loan can have a detrimental effect on your credit score, while an increase in EMI outgo can lead to loan default. Let's take a look at some of the potential obstacles:
Challenges faced by home loan applicants
Rejection of application
One of the major problems faced by home loan borrowers is the rejection of the application at the first stage itself. This is usually due to a discrepancy in the borrower's qualifications. There can be many discrepancies in the age, financial status and documents of the borrower. So, confirm the eligibility criteria and other details before submitting the application. Also, make sure you have all the necessary documents with you.
High rate of interest
When choosing a low emi, you need to understand its danger.A lower EMI per month can lead to a higher interest rate, which can turn out to be a larger amount than your loan. So, take a look at the interest amount for different EMIs using an online home loan EMI calculator and compare and figure out which are the best rates. Also, home loans are offered at a fixed or floating interest rate. Consider both types of interest for feasibility before choosing a suitable loan.
Down payment
As per RBI guidelines, lenders can finance up to 75% -90% of the property price. They can't afford the full cost. Borrowers are required to pay the remaining 10% -25% as a down payment on the property.
The following table shows how lenders typically allocate loans:
| Loan Amount | Loan Eligibility Depending on the Cost of Property | Minimum Down Payment |
| Up to Rs.30 Lakh | 90% of the Property Value | 10% of the Property Value |
| Rs.30 Lakh Up to Rs.75 Lakh | 80% of the Property Value | 20% of the Property Value |
| Value Above Rs.75 Lakh | Up to 75% of the Property Value | 25% of the property value |
For example, if you want to buy a house worth Rs 60 lakh, you will get a loan of Rs 48 lakh. The remaining amount, i.e. Rs 12 lakh, has to be paid as your own payment.
Issues related to legal and technical assessment
The property applied for the loan will be subjected to rigorous legal and technical assessments. Certified lawyers will visit the property and examine the legal documents like sale deed, property chain, property map etc in detail for authenticity. If something suspicious is found, a report will be issued, and therefore the loan may be refused.
The lenders will assess the building construction in accordance with the property map with the help of structural engineers. If there are deviations or other issues, they may lower its valuation, which will affect your principal amount; you may be in a position to get a lower loan amount at a higher interest rate.
Failed to comply with FOIR
A fixed liability ratio (FOIR) is the ratio between your income and your EMI. If you have a negative FOIR, it will be difficult to get a loan. FOIR is calculated based on your income. High-salaried applicants can get the loan approved even if they have an EMI of 50% -60% of their income. At the same time, those with moderate salaries should ensure that the EMI does not exceed 30% -40% of their income.
Processing fee
Each loan applicant will have to pay a processing fee of up to 4% + GST of the loan amount as applicable. Be sure to understand exactly what percentage of your total credit cost comes from such fees and other additional loan charges. Lenders do not have to explain this.
Problems of ownership documents and NOC documents
A No Objection Certificate (NOC) from local bodies is required to start any building construction. NOC papers and title deeds should be issued as per the prescribed format to facilitate loan processing. Wrong paperwork, errors in property details, and fake documents can lead to loan rejection. So, ensure proper documentation before submitting them.
To avoid the hassles during loan approval, understand the common problems associated with home loans that are commonly faced by everyone and find a solution to it. Each lender may have prerequisites that you must meet in order to qualify for a home loan. Check various terms and conditions and current market trends to make decisions.
