You prepared everything from documentation to salary slips to your EPF statements and submitted them to the bank for your home loan. You have a good credit rating and you wait for your loan to be approved. Sadly it got rejected! Why is that so?
Not always about you
The unfortunate thing is that when it comes to home loans, it is not always about your credit rating and financial health. Several other factors will come into play which the bank or financial institution will take into consideration with every application and there will be times when it is not because of you. So what would be the influencing factors why you did not get the loan?
Credit health and rating
The most obvious and straightforward reason is that your credit rating is not good enough. If you have high financial commitments or you have defaulted in payments, you might not get a home loan approved because it is usually high value. The bank would be suspicious as to whether you can handle another high amount loan. This is common. But you might also have the loan rejected if the following issues arise:
- Geographical reasons and land type – Where the property sits will play an important role here. If it is on freehold land, then the bank would be fine but if it is a leasehold property, and it is about 50-60 years left, then you probably can’t get a loan for this. This is because the banks regard them as high-risk. There are certain locations that are not very promising when it comes to properties and banks are quick to reject loans for such places.
- Price – It is often hard to get a loan if you are applying for less than RM100,000. Banks are known to reject loans that are lower in value as it is quite likely of defaulting.
- Property Developer – Banks do have a list of certain developers who are on their ‘blacklist’. You might not know it but if the bank rejects your application because of the developer, chances are there is something wrong with the company.
- Condition of property – This could refer to places with high-tension cables and also because of other additional fees. There are properties in the Klang Valley that are below market price but banks are not rushing out to give home loans for these spots. This is because they are poorly managed and not maintained well over the years. If you are applying for a loan for these places, you might find it hard to secure a loan because the banks might not want to take such unwanted risks.
Putting it all together, you should consider the location and type of property you are buying before deciding. It would not make sense that a home in the Klang Valley can go below market price. Check with the bank before you make the decision and see how likely you can get a home loan from them (even if your credit health score is perfect).