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Many a slip between the loan and the home

10 reasons why your application can get cancelled post sanction

Brijesh Parnami
For many, it takes years of hard work and determination to be able to see the dream of owning a house come true. Aaskah Sehgal, too, had the same aspiration ever since he joined his first job at 23. The financially savvy Aakash knew he had to approach a bank for a loan to fulfil his goal and therefore he maintained a healthy credit history, filed his taxes on time, and never defaulted on any payments.

He finally zeroed in on a house. When a pre-approved loan was sanctioned to him, he thought half the battle is won. But before his loan was disbursed, he was told that his sanctioned loan has been cancelled. While many face procedural glitches while obtaining a home loan, for Aakash it was something unlikely.

In case of a pre-approved home loan, while the seeker is required to undergo all the documentation process, the bank does not get to run a check on the property title. The scrutiny is done before disbursing the money. And this is when complications can occur. If any of the following happens, you will need to look for another bank or non-banking financial companies that may be willing to lend you. But it may come with slightly higher interest rate.

Developer not approved
Lending institutions usually sanction loans to developers which are approved by them. The builder has to undergo much scrutiny to gain such recognition. It may not take much for a developer to fall off the eligibility bracket. Your bank might cancel the loan if the builder no more falls under the lender's approved criteria.

Developer approved, project isn't
In some cases the developer may have the lender's approval, but this may not be valid for all projects under its banner. This can be one of the reasons behind cancellation of an approved loan. There is a possibility that the approval may come in the future but it is advisable to book a home where both, the developer and the project, are funded by the lending institution.

Floor not approved
Lenders follow many measures and parameters while giving approval for funding a property. Sometimes, your sanctioned loan may be cancelled just because the particular floor on which you have booked your flat is not approved by the lender.

Not in lender's geographic limit
With available land shrinking at a fast clip, developers are today exploring outskirts of major cities to build housing projects. While these developers are stretching their boundaries by turning outskirts into new townships, many a times these extended limits do not fall within the approved geographic bracket of the bank or the lender. If this happens, there are chances your loan will be cancelled.

Residential unit under commercial use
In case of pre-approved loans, lenders just check the creditworthiness of the seeker. Property checks come later. Many lenders do not offer loans for commercial properties or for a residential unit, which is under commercial use at the time of application. Therefore, be sure that you clear any such discrepancy or doubts with your lender before approaching for a loan.

Loan scheme discontinued
With the rising competition, lenders keep changing their loan schemes to match rival's product offering. Therefore, one of reason behind cancellation of your sanctioned loan may be that your lender has stopped lending the kind of loan you are seeking, and you were not aware about it. For example, a bank may give the borrower a pre-approved loan for a teaser scheme but discontinues the product later.

Developer under watch
Many a time, a sanctioned loan gets cancelled just because a developer enters into a watch-list or is blacklisted by the lender due a recent bad borrowing, fund-flow matters, statutory issues, or labour issues. It can also happens if there are personal matters of the directors that are of concern to the lender.

Fall from eligibility criteria
A credit score is imperative when a lender sanctions a pre-approved loan. And there are times when your credit eligibility could change between the time you got a pre-approved loan and when the bank is about to disburse the money. Lenders double-check your financial movement a day before disbursing the loan. During this time if they find that you have defaulted on any payment or you took another loan, it might affect your eligibility. Many lenders also have a policy of not sanctioning a third home loan.

Exposure limit for the developer reached
Every bank or financial institution sets an exposure limit for borrowers, including developers. This means that a bank will not sanction any loan for that particular developer beyond a certain amount. Therefore, a sanctioned loan is cancelled because the developer has reached the exposure limit for the lending institution.

Lender discontinues home loan business
This could be the worst of all possible reasons and a rare one too. Many lenders, especially private financers tend to shut down their mortgage wing if they fail to make profit due to lower margin, low business volume, recovery issues, and so on. Although, in no circumstances you can predict this misfortune, it is always advisable to seek loan from respected bank or reputed private financer.

The writer is the CEO of Destimoney Advisor
 

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First Published: Aug 22 2015 | 10:01 PM IST

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