Most people in Malaysia would definitely apply for a bank loan in order to buy a house whether it is for own stay or investment.There’s only small percentage of house buyers that could afford in ‘cash terms’ and most of them are older generations.
A lot of people who are applying for a house loan are not fully aware whether they are qualified for the loan amount required to buy a house.There could be a few reasons why your loan can get rejected and below are the most common reasons :
1) Low Repayment Capacity
It’s important to keep your credit score in check. If you have missed paying your credit card bills or any other loans, it could affect your credit score badly. Banks can check your credit score via CCRIS to analyse your performances on repaying your financial commitments.
- Before applying for a loan, ensure that you have a good credit score. You can do that by settling your credit card bills on time and paying off any loans you have.
- Make sure that you do a proper analysis of the loans before applying for it. Don’t apply for loans from different banks at the same time.
2) Unstable and Insufficient Income
Banks will make sure that the loan applicant has a stable recurring income so they can be assured that you would be able to handle the monthly mortgage repayments. Your employment status plays an important role in order to qualify yourself. Some of the professionals who generally get their housing loans rejected are employees on probation, employees on contract, self-employed professionals, temporary workers, and those who earn by a commission.
- If you have just changed your job, make sure to apply after the completion of at least 6 months to improve your chances of getting a loan.
- Business owners who are looking for housing loans can apply when their company profit is steady.
- Make sure you are earning enough to repay the loan.
3) Applying for High Credit
Are you aware how much exactly is your total loan commitments with the banks? Usually, the banks will use Debt Service Ratio (DSR) method to see whether you are qualified for a new house loan. DSR is calculated based on the applicant’s total loan commitment against the total income (total loan commitments / total income x 100% = DSR%). If your total loan commitments plus new house installment is high,then the higher chances that your loan will get rejected.
- Go through the different loans offered by different banks and shortlist the ones you would like to apply for.
- Use the home loan calculators on the banks’ websites and check how much funds can you borrow from the bank
4) Poor Financial Records
Have you ever had any bankruptcy, outstanding summons or litigation cases against you in the past or at present? Banks can trace all this data through credit reporting agencies such as CTOS Data Systems Sdn Bhd and RAM Credit Information Sdn Bhd.
- If you have had cases against you and you are not getting a loan from any bank, look for other financing alternatives.
- If you were bankrupt, establish and maintain a good credit history.
5) Incomplete Application and Submission of Inaccurate Documents
Your own negligence could be the reason why your house loan get rejected sometimes. It’s important to provide all the documents that requested from the banks correctly or they could simply just reject your loan application due to incomplete/inaccurate or both.
- Check the list of documents properly before submitting your application. If there is a delay in receiving the property documents, wait for all the necessary documentation and then apply.
- Go through your application more than one time and see if you have missed anything before submitting.
6) No Credit History
As mentioned before, the banks will be able to track your credit history when you apply for a loan. Not having a credit history is as bad as having a poor credit history. Since you don’t have a credit history, banks won’t be able to track your records. Even if you manage to secure a loan, you will get it a much higher interest rate.
- Establish a credit history by applying for a credit card and using it.
- Settle your bills on time and keep your debts low.
7) Property or Developer is on the Bank’s Blacklist
Yes properties and real estate developers could be on banks’ blacklist too. There are various reasons why developer could be blacklisted by banks, especially if they are operating without a license or if they have any abandoned projects. While for properties, whether it is not ideally located according to the bank or if there are no property papers.
- Though this is not under your control, you can always check before opting for a property and a developer.
- There are more than 100 property developers who are blacklisted in Malaysia, so doing a background check would be a good idea.