Top Four Reasons why your home loan might be declined
You’re ready to buy a home, but you can’t find a bank who will approve your home loan. While this might seem discouraging and frustrating, it is not necessarily the end of your dream to become a home owner. Once you know the reason that you are considered a bad risk, you can improve your eligibility. Usually, it just takes a little more time and to improve your eligibility.
Here are the top four reasons banks might decline your loan application:
1. High Commitment
You have high commitments compare to what you are earning monthly. If you’re earning RM5000 monthly and utilised more than 70% of this income, you’re creating a higher risk for the banks. People with high commitments tend to struggle when bad economic hits and it is a bad business for the bank. Every bank has a sensible borrowing guidelines to minimise the risk.
2. Bad credit
Again, if you have a poor history of paying loans or repaying credit card, a bank is not going to trust you to pay off a home loan. Clean up your act by settling your debts and paying off credit card bills promptly, so you come across as a more realistic prospect for lenders.
3. Low Income & Unstable Employment
Banks will be looking closely at your employment background to confirm whether you have a steady employment and a regular income. Unstable employment normally means you work less than one year with the same company and frequently change job. If you’re a fresh graduate, it’s understandable. But, if you have been working for years, changing job too often is not a good thing.
Recently, Oil & Gas industry was hit badly and this changes the bank perspective of giving out a loan. Oil & Gas used to be the most lucrative industry and was highly favourable and welcome to the bank.
Good income normally means you are earning more than RM10,000 and manage your commitment low. If you’re earning more than RM5000 monthly and kept your commitment low, you are considering favourable to the bank.
However, if you’re earning less than RM3000 monthly, you will be perceived as a higher risk and your loan application may be declined on these grounds.
If you are currently unemployed, your chances of being approved are extremely low, as you cannot repay a home loan if you do not have a viable income – and do you want that additional financial stress while you are out of work? Once you have a steadier employment history, banks will look at you more favourably!
4. Property Location
Not all the properties in Malaysia are favourable for a bank to finance. A Bank will prefer to finance a property that has potential increase in value and has reselling value. If your property located at landslide area, oxidation pond, flood, near high cable tension or with any negative factor, it’s will not favourable to the bank.
Even you have the best credit background and earning thousand of ringgit if the property location is not favourable, your loan will still be declined.
For more information about how you can secure a home loan, contact us today, so we can help you follow the right path towards owning your home.
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