By Mr Brijesh Parnami, Chief Executive Officer, Destimoney Advisors
For many it takes years of hard work and determination to be able to see the dream of owning a house come true. Similar was a case with Aakash Sehgal, who always dreamed of calling a home his own ever since he joined his first job, at 23. While he saved persistently be able to buy a new house, he knew he would have to approach a bank or some financial institution to seek a home loan. Accordingly, he made it sure to follow the do’s and don’ts of the loan procedure very acutely such as maintaining his credit score, be consistent with his job and others.
His dedication bore fruit the day he found a house he absolutely loved. He felt half of his battle was won when he got a pre-approved home loan. However, the joy did not last as just before his loan was about to be disbursed, Aakash was notified that his sanctioned loan has been cancelled. While majority of people 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 documentation process, the bank does not run a check on the property’s title. This formality is done once loan is actually sanctioned and this is when the complication occurs. Let us explain few possibilities that may lead to cancellation of such pre-approved home loans.
1. Lender not funding that particular developer
Normally, bank loans are sanctioned for a property wherein the developer is well recognized by the bank or the lending institute. The developers have to undergo much scrutiny to gain the approval tag. It may not take much for a developer to fall off the eligibility bracket. Your bank might cancel the loan if the developer no more falls under its approved criteria. Make your checks!
2. Particular project not funded by the lender
In some cases the developer may have the lender’s approval, but this approval may not be valid for all projects under its banner. Therefore, one of the reasons behind cancellation of your approved loan can be that while the developer is recognized by your bank but the particular project is not approved and hence funded for by your lending institute at that particular time. The approval may come in a month or two but it is advisable to book a home where both, the developer and the project, are funded by your lending institute. Avoid the hassle.
3. Particular floor does not fall under eligibility criteria
Lending institutes and bank 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 funded by your bank. Make inquiries!
4. Property is not in the geographic limit of lender
With available land shrinking at a fast pace, developers are today exploring outskirts of Delhi NCR to build housing projects. While these developers are stretching their boundaries by turning outskirts into new townships, many a times these extended limits fail to fall within the approved geographic bracket of the bank or the lender. In case where your dream is located in an area beyond the approved geographic limit of your lender, there are chances of your loan being cancelled. Check the lender’s geographical bracket!
5. Lender does not fund commercial property or residential property under commercial use
In case of pre-approved loans, lenders just check the creditworthiness of the seeker and his/her eligibility for the loan process. The checking of property comes later. Many lenders do not offer loans under-construction or ready commercial property, or residential unit that is currently under commercial use. Therefore, be sure that you clear any such discrepancy or doubts with your lender before approaching for a loan.
6. Lender no more funds for type of loan you are seeking
With rise in competition lenders have evolved various policies and loan types to loans easier. In fact, they keep changing their criteria every now and then to better suit their market needs. 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. Keep track of policy changes!
7. Developer gained a bad repo of late
Many a time, a sanctioned loan gets cancelled just because a developer enters into a watch-list or even a blacklist of the lender due a recent bad borrowing, fund-flow matters, statutory issues, labor issues or even personal matters of the directors. In such a scenario, chances are more likely for the lender to refuse to disburse your sanctioned loan.
8. You fall from the eligibility criteria
Like credit score is imperative while you seek a loan, in case of pre-approved loans too, credit worthiness plays a pivotal role. While in case of normal loans, the lenders run a check before sanctioning your loan, in pre-approved loans, the lender double-check your financial movement a day before disbursing the loan. Therefore, during this time if they find that you have defaulted on any payment in between with any other lender(s) or availed another loan, it might affect your eligibility for loan disbursement. Also, you may fall from the criteria in case you have borrowed a loan in between, making the present one a third loan, as the lenders have a policy of not sanctioning a third home loan.
9. Exposure limit for the developer
Every bank or financial institution sets an exposure limit to your borrowing amount. This exposure restricts the upper limit for your loan. In case of home loans, while seeker is prescribed with an upper limit, an exposure limit is also set for the developer. This means that a bank will have a certain amount beyond which it would not sanction any loan for that particular developer. Therefore, many a times a sanctioned loan is cancelled because either the developer you chose do not fall under the loan amount that sought for.
10. Lender has stopped providing funds
This could be the worst of all possible reasons. Many lenders, especially private financers tend to shut down their mortgage wing if they fail to make profit in the business model due to less margin, low business volume, recovery issues etc. Although, in no circumstances you can predict this misfortune, it is always advisable to seek loan from respected bank or reputed private financer.