You are excited to buy your new property and found your ideal home. But the excitement quickly turns to disappointment when your home loan application gets rejected by the bank. In this article I will highlight a few reasons why home loan applications are turned down.
Gross income too low to afford the property
The qualification figure for a home loan is 25 to 30 percent of the joint gross income of the applicants; if the monthly repayments exceeds this figure the home loan application will not be approved. As property prices have been increasing it has become more and more difficult to qualify for a home loan in South Africa with this criteria.
Home loan applicant’s credit profile
The applicant’s credit profile is an important consideration for banks when they consider the home loan application for approval. The bank uses a scoring model which takes into account the current income, employment history, consumer bureau results and applicant’s performance with the bank itself. A poor scoring in one or more of these factors may lead to the home loan application being turned down.
Home loan applicant’s payment history
Your payment history across a variety of recorded transactions will be scrutinized by the bank before your home loan is approved. Skipped payments on motor vehicles, furniture, clothing and professional services as well as any other bad debts may contribute towards your home loan application being turned down.
No deposit available
If you cannot afford the deposit or the registration costs up front you will have to apply for a 100 percent home loan. A 100 percent home loan could push the monthly payments beyond what you can afford to pay monthly.
Physical assessment of the property
The bank will make a physical assessment of the property before the home loan is approved. The condition of the property, location, security and demand for property in the area will be considered and a severe shortcoming in one or more of these areas could also lead to the home loan application being rejected.
If you applied for a home loan and the bank rejected it, found out on which criteria you failed. If you believe that the loan was unfairly turned down raise the issue with the bank or work on the areas that you can improve before applying for a home loan again.