Getting your home loan application turned down can feel like a dead-end, but you shouldn’t give up hope. Here, we share four steps that you can take to maximise your chances of obtaining approval in the future.

Check with the lender on the reason for declining your application. Usually, banks look at your credit score to determine your ability to pay back and your past financial habits or patterns, including any loan applications that were rejected or approved.

Too many existing loans under your name could also affect your ability to get a new one as it increases your debt service ratio (DSR). If you exceed the lender’s DSR upper thresholds, then chances are your application will be declined.

It’s important to know that past rejections of loan applications contribute negatively to your overall score – so it’s best to strategise your next loan applications wisely.

Once you know the reason for the loan rejection, you can start building credit trust. One way to check your credit score is through Bank Negara Malaysia’s CCRIS or CTOS.

Issues such as late payments can give a bad impression to lenders and might impact your future application. So try your best to pay your credit card bills, car loan and other on time – one way to do it is by setting a payment reminder on your smartphone.

If it’s concerning your DSR, try to settle one or more of your debt using a method that’s most comfortable to you.

• DSR helps to determine whether or not you can afford to service your loan monthly.
• To calculate:
  

A poor credit score is not the only reason lenders reject loan applications. Having no credit record makes banks uncertain of your ability to pay. It could be a good idea to build up a clean credit history.

Opt for a smaller loan if you can afford it. Smaller loans might a higher approval rate because the chances of defaulting on payment is lower. Alternatively, look at flexible payment terms to help you manage your payments better. 

Some forms of government assistance could ease the difficulty of obtaining a loan. If you’re applying for a housing loan, take note the numerous schemes available such as the Perbadanan PR1MA Malaysia Berhad housing scheme, and i-MILIK, where first-time home buyers get 100% stamp duty exemption for properties priced RM500,000 and below (until December 2023)**.

Do your research. Compare the different loans available and choose the best one for you. Online resources such as PropertyGuru’s Home Loan Pre-Approval shows you the loan amount you’re qualified for as well as the homes that match the amount. It also shows your chances of getting a loan approved outside of the recommended amount.

To strengthen your application and the lenders’ confidence in your ability to repay the loan, consider applying with a cosigner or collateral, being fully aware of the risks involved to all parties. Avoid applying for many loans all at once, as this could also give you a bad credit score.

Finally, approach BNM’s online financing advisory service, MyKNP, with your home financing questions. With a bit of strategy, you’ll be on your way to owning a home soon.

*https://www.edgeprop.my/content/1501065/loan-approval-rates-property-purchases-trended-lower-2018
**https://www.hmetro.com.my/mutakhir/2022/07/861866/kerajaan-perkenal-i-miliki-pengecualian-duti-setem-sehingga-100-peratus 

This article is brought to you by CIMB as part of our ongoing efforts to raise the level of financial literacy among Malaysians. Financial knowledge and understanding are key to making well-informed and meaningful financial decisions that will improve all our well-being. This, in turn, achieves CIMB’s purpose of advancing customers and society.