The borrowers often get a sigh of relief when a sanction letter of the loan is issued from the banks. But what they tend to forget is a sanction letter is just a milestone in the loan approval process. The applicant has to wait until the full amount has been disbursed. Until then the loan applications have the risk of getting rejected at any point. The banks and Home Loan lenders can stop or reject your loan after issuing the sanction letter.
The reasons for which the loans get rejected before disbursals can be:
Low Property Value:
The banks can reject the loan if the property value is low. You may feel confident about the property prices when you inquire the property rates from the seller or the neighboring estate agents. This price may be true but might not be of relevance to your property. The age of the construction, market value, the quality of the building, locality etc. are the point on which the banks judge the property. If the property is eligible according to their criteria then the banks might approve the loan.
In many cases, the value of the property is lower than the amount which is sanctioned by the banks, they may lower the sanction amount or even stop the disbursement of the loan.
If the Property has Some Legal Settlements Pending:
The banks do not provide loan on the properties that have ongoing legal disputes. The banks do reject the loans if they find out that the land has legal disputes to be settled. All the documents required for Home Loan that are associated with your property are checked by the legal team of banks. If they find even a minor fault that is related to a legal dispute then the loan can get rejected.
Negative Field Investigation Report:
While applying for the loan, it is necessary that all the documents and proofs provided by you should be authentic. These documents are necessary for the sanctioning of the loan. The documents are verified by the members of the banks. These members of the bank verify the documents by doing a field investigation. In some cases, the field investigation report may get delayed to reach the banks. If the investigation report has negative markings against the borrower, the loan will get rejected even after the sanctioning letter has been issued.
Processing Fee not Cleared:
The banks charge you a processing fee of 0.5 percent to 1 percent. The payment of the processing fee has to made by a issuing a cheque to the bank. The bank may send the cheque for clearance after the sanction letter has been issued. If the cheque provided by the applicant gets rejected, the banks may take it as an indication for the incapability of the applicant to pay the loan. It can be a major reason why your loan gets rejected.
The Trustworthiness of the Seller:
While buying a property, a buyer may get attracted to lower property rates, these rates can be a trap for the buyer if the seller or the builder is not trustworthy. The banks provide loan only for those projects who have trustworthy builders. These builders have less risk of forgery and are verified by the banks. If the buyer applies for a loan on a property which has an untrustworthy owner who is not verified by the bank, the bank will not disburse the amount.
The chances of getting you loan approved can increase if these basic things are kept in mind while applying for a Home Loan. As the rejection of the loan can have a negative effect on your CIBIL score.