Getting your dream home is often difficult. It feels like being rejected by your crush—it hurts, but you have to move on quickly and find out why. Rejection of a mortgage application by a bank does not mean financial doom. Usually, there are clear factors that you can improve. Here are the 5 most common causes of mortgage rejection and effective solutions to overcome them:
1. Poor Credit History (Kol-2 to Kol-5)
This is the main issue that is often found. Credit history (Kol) shows the smoothness of your credit payment history. Kol-2 (Under Special Attention) to Kol-5 (Default) are red flags for banks. In essence: Banks see you as a borrower who is ‘somewhat difficult to collect from’.
Effective Solution: Pay off your existing loans. Once paid off, monitor your credit score (Financial Information Service System/SLIK OJK) until it returns to Kol-1 (Smooth). Does it take time? Yes, but this is the foundation of the bank's trust.
2. Data Errors or Incomplete Documents
Banks rely heavily on details and completeness. Small errors in filling out forms, discrepancies in data on your ID card and pay slips, or missing documents (e.g., annual tax returns) can immediately cause your application to be rejected.
Effective Solution: Correct the data and complete the documents. Ensure all data is consistent and every requested document is clearly attached. Double-check everything! This attention to detail can save you from a tedious repetitive process.
3. Income Considered Insufficient for Installments
Banks use careful calculations. If the mortgage installment you apply for is too large compared to your monthly income, the bank will assume that you are potentially unable to pay.
The Right Solution: Choose a simpler house (or find a larger down payment). If your income cannot cover the installments for a luxury home, realism is key. Look for a property with a more affordable price.
4. Current Installments Exceed 30% of Income
This is closely related to point 3. Banks have a debt tolerance limit (Debt to Income Ratio), and generally do not want your installments (including new mortgages) to exceed 30% - 40% of your total income. If you already have large car loans, personal loans, or credit card debts, banks will back out.
Effective Solution: Manage your debt more wisely. Before applying for a mortgage, focus on paying off or reducing other debts. The cleaner your debt profile, the more likely the bank will approve your mortgage application.
5. Employment Status Does Not Meet Requirements
Some banks may be more conservative and view employment status as a risk. Contract employees, freelancers, or small business owners who are not yet established often encounter difficulties because they are considered to have unstable incomes.
Effective Solution: Optimize your credit score to demonstrate credit responsibility. If your employment status is somewhat “flexible,” compensate by showing a perfect debt payment history (Column 1). In addition, ensure you have valid and stable proof of income (bank statements/current account statements for the last 6 months) to convince the bank that even though your income is not “standard,” it is still reliable and consistent.
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