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A Few Reasons behind Denial of your Home Loan

Author: Navjeet Kaur
by Navjeet Kaur
Posted: Nov 16, 2014

In your journey of searching for a dream house, you might come across an option that perfectly matches your preferences and budget. However, due to a rejection from bank when it comes to acquiring funds to afford the purchase, your dream can be crushed in a moment. A home loan rejection serves as a major obstacle when you are so close to fulfilling your dream. Understanding the common reasons behind finance rejection can help you take measures to avoid these mistakes. Below mentioned are some of the reasons responsible for denial of mortgage.

Bad credit score

A poor credit rating is one of the most common reasons for rejection of home loan. Poor credit score is the result of bad credit history which usually happens because of delayed and missed payments. In order to gain insight on the current financial credibility of an applicant, a lending institute takes into account the credit report of that particular person. This enables the banks to differentiate between a good borrower and a bad borrower. Because you have bad credit score, lenders doubt your ability to repay the funds on time. Hence, if you realize that your credit rating is not good enough, make sure to improve it prior to applying for the finance.

Irregular tax filings

There is a reason why you need to file your tax returns on time. Not possessing a clear record of income tax returns, can force the banks or lending institutes to reject your application for finance. Thus, before you apply for funds, make sure that your income tax record for the past 2 years successfully meets the bank’s guidelines.


Age factor plays a crucial role in influencing the approval of mortgage. Loan rejection due to age is common for many people who apply for mortgage at the time of approaching their retirement age. In such a scenario, banks usually grant short term loans that come with large monthly installments and are hard to pay off for many common wage earners. Because of your age, the banks feel you might not be able to repay the money on time and this leads to rejection. The only way to prevent denial in such a scenario is to make investment prior to reaching your retirement age or having enough savings to be easily able to pay higher monthly payments.

Being a defaulter

There is no secret to it that the bank professionals do not entertain faulty payment history. In case you have defaulted on your previous mortgage, securing another mortgage becomes almost impossible. However, there are chances that the banks identify you as a defaulter due to your residential address. If the previous homeowners had defaulted on loan, your application might get rejected. Fortunately, the misunderstanding can be informed to the bank to get your finance approved.

Besides, make sure to have stable income as it helps convince the lenders of your ability to repay the finance on time. If bank is satisfied of your stable financial condition, securing required funds would not be a hassle. Thus, bear these points in your mind to make sure your approval for finance is guaranteed.

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Author: Navjeet Kaur

Navjeet Kaur

Member since: Oct 29, 2013
Published articles: 896

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