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You did everything right. You found the perfect plot in Shadnagar, paid the advance, and submitted your documents to the bank.
Then came the shock: “Loan Application Rejected.”
A rejection letter from a bank (especially SBI or HDFC) can be devastating. Not only does it stop you from buying your dream property, but it also leaves a “Hard Inquiry” on your CIBIL report, dropping your score by 10-20 points instantly.
But here is the good news: A rejection is not the end. In 90% of cases, loans are rejected for minor technical reasons that can be fixed.
In this detailed guide, we reveal the 7 Most Common Reasons why home loans get rejected in Telangana in 2026—and exactly how to fix them so you can re-apply and get approved next week.
Must Read: Complete Guide to Plot Loans in Hyderabad: Interest Rates & Banks List (2026)
Reason 1: The “Low CIBIL Score” Trap
This is the #1 reason for rejection. Most banks (SBI, HDFC, ICICI) require a CIBIL score of 750+ for the best interest rates.
- 750 – 900: Excellent (Instant Approval).
- 650 – 749: Risky (High Interest Rate).
- Below 650: Rejected.
The Hidden Trap: Even if your score is 780, you can still be rejected if you have a “Written Off” or “Settled” status on an old credit card from 5 years ago. Banks see “Settled” as “Did not pay full amount.”
How to Fix It:
- Download your full CIBIL report (not just the summary).
- Look for “DPD” (Days Past Due) in the last 24 months.
- If you have a “Settled” account, approach that bank, pay the remaining amount, and ask for a “No Dues Certificate” (NDC). Then, raise a dispute with CIBIL to remove the “Settled” tag.
Reason 2: The “Unapproved Layout” Issue (Property Rejection)
Sometimes, you are eligible, but the property is not. In Hyderabad, banks are extremely strict about Gram Panchayat (GP) layouts.
- The Rule: If a layout does not have HMDA or DTCP technical approval, Nationalized Banks (SBI, Union Bank, Canara Bank) will reject it immediately.
- The Confusion: Agents often say, “Sir, this is GP Approved, it is legal.” Yes, it is legal to buy, but it is illegal for a bank to fund without LRS.
How to Fix It:
- Scenario A: If the layout has LRS Proceedings, apply to LIC Housing Finance (they fund LRS plots).
- Scenario B: If there is no LRS, stop. Do not apply to any bank. You will only get rejected. Look for a different property.
Reason 3: “FOIR” (Fixed Obligation to Income Ratio)
Banks use a formula called FOIR to decide your loan amount.
- The Rule: Your Total Monthly EMIs (Car Loan + Personal Loan + New Home Loan) cannot exceed 50% of your Net Monthly Salary.
Example:
- Salary: ₹1 Lakh/month.
- Existing Car Loan EMI: ₹20,000.
- Remaining Limit: ₹30,000.
- Result: You can only take a Home Loan with an EMI of ₹30,000 (approx. ₹35 Lakhs loan). If you applied for ₹80 Lakhs, the bank will reject it.
How to Fix It:
- Close Small Loans: Pay off your car loan or personal loan before applying. This frees up your FOIR limit.
- Add a Co-Applicant: Add your spouse or working parent as a co-borrower. Their income will be added to yours, increasing the total eligibility.
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Bank vs. Housing Finance Company: Which gives higher loan amount? »Reason 4: The “Link Document” Nightmare
This is the most frustrating reason because it is not your fault. When you apply for a loan, the bank’s legal team verifies the property’s history for the last 13 to 30 years.
Why Rejection Happens:
- Missing Link: If the property changed hands 4 times (A → B → C → You), but the sale deed from A to B (dated 1995) is missing, the bank will reject the file.
- Name Mismatch: If the owner’s name is “Ramesh Kumar” in the sale deed but “Ramesh K.” in the revenue records (Pahani/Adangal), the bank will pause the application until it is rectified.
How to Fix It:
- Apply for Certified Copies (CC): Go to the MeeSeva portal or the local Sub-Registrar Office (SRO) and apply for the “Certified Copy” of the missing link document.
- Rectification Deed: If there is a name error, ask the previous seller to sign a “Rectification Deed” to correct the spelling.
Reason 5: Job Stability & “Frequent Hopping”
Banks love stability. If you change jobs too often, you are a “Risky Borrower.”
- The Rule: Most banks (especially SBI) require you to be in your current job for at least 1 year or have a total continuous work experience of 3 years.
- The Red Flag: If you joined a new company just 2 months ago and apply for a loan today, the bank might reject it because you are still on “Probation Period.”
How to Fix It:
- Wait for Confirmation: Do not apply while you are on probation. Wait until you get your “Employment Confirmation Letter.”
- Show Continuity: If you changed jobs for a better salary, show the bank your relieving letter from the previous company to prove there was no gap in employment.
Must Read: Can I Get a Home Loan for Gram Panchayat Layout? (Rules & Risks)
Reason 6: Age of the Applicant
The tenure of your loan depends on your age.
- Retirement Age: Banks assume you will retire at 60 (for salaried) or 65 (for self-employed).
- The Trap: If you are 50 years old and apply for a 20-year loan, the bank will reject the tenure (not the loan itself). They will force you to take a 10-year loan, which increases the monthly EMI drastically. If you cannot afford that high EMI, the entire loan is rejected.
How to Fix It:
- Add a Younger Co-Borrower: Add your son or daughter (earning member) as a co-applicant. The bank will then consider their age to give you a longer tenure (up to 25-30 years).
Reason 7: The “Guarantor” Mistake
Did you sign as a guarantor for your friend’s education loan or your cousin’s car loan 5 years ago? If they defaulted on their EMI, YOU are also a defaulter in the eyes of the bank.
Why? Being a guarantor means you are legally responsible for repaying that loan if the primary borrower fails. This appears on your CIBIL report.
How to Fix It:
- Check CIBIL: See if any unknown accounts are linked to your name as “Guarantor.”
- Force Closure: Ask the primary borrower to close that loan or regularize the payments. You cannot get a new loan until that “Default” tag is removed from your report.
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Master Guide to Home Loan Foreclosure Process »FAQs
It is difficult to get a loan from top banks like SBI or HDFC with a score of 650. They typically require 750+. However, NBFCs like Bajaj Housing Finance or Tata Capital may fund you but at a higher interest rate (9.50% – 10.50%). You should focus on improving your score for 6 months before applying to avoid high interest.
No. The Processing Fee (usually ₹2,000 to ₹10,000) is collected to cover the cost of legal verification and valuation. Even if the lawyer gives a negative legal report and the loan is rejected, the bank will not refund this fee.
You need to apply for a Certified Copy (CC) of that specific sale deed from the local Sub-Registrar Office (SRO) or through the MeeSeva online portal. Once you get the official CC with the government stamp, submit it to the bank. Most banks accept a Certified Copy in place of a lost original document.
Likely, yes. Banks require “Job Stability.” If you are still on Probation, banks consider you a high-risk applicant. It is best to wait until you receive your Confirmation Letter or complete at least 6 months in the new company before applying.
When you sign as a Guarantor, you are legally equal to the borrower. If they miss an EMI, it appears on your CIBIL report as a default. To fix this, you must force the primary borrower to clear the dues or close that loan. Until then, your CIBIL will show “Non-Performing Asset” (NPA), and no bank will give you a new loan.
Conclusion: Don’t Panic, just Pivot.
A rejection letter is just a pause button, not a stop button.
- If SBI rejects you for a “Small Property Issue,” move to HDFC.
- If HDFC rejects you for “Credit Score,” move to an NBFC (Bajaj/Tata).
- If everyone rejects you, fix your CIBIL score for 6 months and try again.
Has your loan ever been rejected? What reason did the bank give? Share your experience in the comments below!