6 uncommon reasons your home loan application might get rejected

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Getting a home loan is a big milestone in your financial journey, but even applicants with decent credit scores and stable incomes can sometimes face rejection. While most people are aware of common causes like low credit scores, high debt-to-income ratios, or incomplete documentation, there are several lesser-known reasons that could derail your loan approval.

1. Frequent job changes or short employment history

Even if you’re earning well, lenders look for employment stability. If you’ve switched jobs multiple times in a short span or are still in your probationary period, your application may raise red flags. Lenders prefer applicants with at least 2–3 years of steady employment, especially in the same industry.

2. Co-applicant’s poor credit profile

Adding a co-applicant with a low credit score or irregular income might harm rather than help your case. Lenders evaluate all applicants equally, and if your co-applicant has a history of defaults or poor repayment habits, it can impact your chances, even if your own record is clean.

3. Previous loan settlements

If you’ve ever settled a loan for less than the full outstanding amount, it’s seen as a red flag by banks. Loan settlements may improve your short-term finances, but they stay in your credit report and signal potential risk to lenders, who may then hesitate to offer a new loan.

4. Property title issues

Even if your finances are in order, a home loan can be rejected if the property you’re purchasing has title disputes, unclear ownership history, or is on land without proper government approvals. Lenders conduct legal and technical due diligence before approving loans, and any irregularity here can lead to rejection.

5. Multiple loan applications in a short span

Applying to several lenders simultaneously or within a short time can make you appear credit-hungry. Each application triggers a hard enquiry on your credit report, and too many such checks can bring down your credit score and raise doubts about your repayment capacity.

6. Low credit utilisation history

Ironically, using very little credit can sometimes work against you. If you have a high credit score but limited credit usage history—say, you’ve never taken a loan or used a credit card—lenders may not have enough data to judge your repayment behaviour, leading to cautious or negative decisions.

While a solid income and credit score are essential for loan approval, don’t overlook these uncommon factors. Be mindful of your employment pattern, the credit health of co-applicants, and your property’s legal standing. Before applying, review your credit report, avoid applying to multiple lenders simultaneously, and seek guidance from a loan advisor if needed to improve your chances of success.