Avoid These 7 Mistakes When Applying for a Home Loan

A home loan application can be rejected or delayed for reasons that have nothing to do with your income or deposit size.

Lenders assess applications against serviceability rules, lending policy, and risk frameworks that aren't always visible until you're already in the process. A minor oversight during the application stage can mean the difference between approval and decline, or between the rate you expect and the rate you receive. Understanding where buyers commonly trip up gives you the chance to prepare properly before you apply.

Applying Before You Know How Much You Can Borrow

Your borrowing capacity is calculated using your income, living expenses, and the lender's serviceability buffer. Under APRA's current requirements, lenders must assess your ability to service a loan at a rate at least 3.0 percentage points above the actual product rate. That means if you're applying for a variable rate loan at 6.0%, the lender assesses your repayment capacity at 9.0%.

Consider a buyer earning $110,000 before tax who applies for a loan without running the numbers first. After HECS repayments, rent, car expenses, and subscriptions, their monthly commitments sit at $4,200. The lender applies the serviceability buffer and determines the buyer can service a loan of $580,000, not the $650,000 they assumed based on an online calculator that didn't account for all living costs. The buyer has already made an offer on a property at $720,000 with a 10% deposit. The loan application is declined.

Before you sign a contract, run your numbers with someone who has access to lender policy, not just a general calculator. A home loan pre-approval locks in your borrowing limit before you make an offer and gives you certainty at auction or during private treaty negotiations.

Changing Jobs During the Application Process

Lenders verify your employment status at multiple points during the application. If you change roles after submitting your application but before settlement, the lender will re-assess your serviceability and may require a new payslip, employment contract, or even a probation waiver depending on the timing.

In a scenario where a buyer accepts a new role two weeks before settlement, the lender may decline the application if the new role includes a probation period and the lender's policy requires three months of continuous employment in the current role. Even if the new role pays more, the change in employment status can reset the clock on your application.

If you're considering a job change, speak to your broker before you resign. Some lenders will accept a contract subject to probation if other elements of the application are strong. Others will not lend until probation is completed. Timing matters.

Leaving Deposit Funds in an Offset Account Linked to an Existing Loan

Genuine savings need to be clearly identifiable in your bank statements. If your deposit is sitting in an offset account linked to an existing loan, the lender may treat those funds as equity rather than cash savings, or question whether the funds have been held long enough to meet genuine savings requirements.

A buyer with $80,000 in an offset account linked to an investment loan applies for a new owner-occupied loan with a 10% deposit. The lender requests three months of statements and sees that the balance fluctuates as rental income flows in and loan repayments are made. The lender cannot confirm the funds have been held as genuine savings and requests the buyer move the deposit into a standalone account for 90 days before re-applying.

If you're planning to use savings from an offset account as your deposit, move those funds into a separate transaction or savings account at least three months before you intend to apply. Keep the statements and make sure the account shows consistent balances over that period.

Applying for Multiple Loans at the Same Time

Every time you submit a formal application, the lender runs a credit enquiry. Multiple enquiries in a short period can indicate financial stress or confusion about your capacity to service debt. Some lenders will decline an application if they see evidence that you've applied with other institutions in the previous 30 days.

We regularly see buyers submit applications to two or three lenders at once in the belief that it will speed up the approval process. The opposite happens. Each lender sees the other enquiries on your credit file and either declines the application outright or requests a detailed explanation. The buyer then needs to explain why they applied elsewhere, and the delays compound.

If you're working with a broker, let them manage the lender selection and application timing. If you're applying directly, choose one lender, submit a full application, and wait for the outcome before moving to another institution. Pre-approval enquiries are different from full credit applications and don't always leave the same footprint, but formal applications do.

Failing to Disclose All Liabilities on Your Application

Lenders assess your liabilities using the information you provide and the information that appears on your credit file. If you fail to disclose a car loan, personal loan, or credit card limit, the lender will see it during the credit check and may decline the application on the grounds that you've provided incomplete or misleading information.

Credit card limits are treated as a liability even if the balance is zero. A buyer with a $15,000 credit card limit and no balance assumes it won't affect their application. The lender calculates serviceability assuming the card is drawn to its full limit and reduces the loan amount by $60,000. The buyer's application is approved, but for less than they need to settle the contract.

Before you apply, list every liability you hold, including credit cards, buy now pay later accounts, car loans, personal loans, and any existing home loans. If you're not using a credit card, close the account or reduce the limit before you apply. Lenders assess based on limits, not balances.

Uploading Documents That Don't Match the Information in Your Application

Your application form, payslips, tax returns, and bank statements need to tell the same story. If your application states you earn $95,000 and your payslips show $88,000, the lender will either request an explanation or decline the application.

This happens most often with buyers who receive bonuses, commissions, or overtime. A buyer lists their total earnings including an annual bonus of $12,000, but the payslips only show base salary. The lender cannot verify the bonus income without a letter from the employer or evidence that the bonus has been paid consistently over the previous two years. The application is delayed while the buyer sources additional documentation.

Before you lodge your application, cross-check every figure on the form against your supporting documents. If you're including variable income such as bonuses or overtime, make sure you have evidence that the income has been received consistently and is likely to continue. Some lenders will accept one year of bonus history, others require two.

Assuming All Lenders Assess Your Application the Same Way

Lending policy varies significantly between institutions. One lender may allow you to capitalise Lenders Mortgage Insurance into the loan amount, while another requires you to pay it upfront. One lender may accept rental income from a property you're about to vacate, while another will not. One lender may assess your overtime at 100%, while another discounts it by 20%.

A buyer applies with a major bank and is declined because their living expenses, calculated using the Household Expenditure Measure, exceed the lender's serviceability threshold. The same buyer applies with a regional bank that uses declared expenses, provides detailed evidence of actual spending, and is approved within a week.

Policy differences are not always visible until you're inside the application process. A broker who works across multiple lenders can identify which institution is most likely to approve your application based on your income structure, employment type, deposit source, and the property you're purchasing. If you're applying directly, you're working with one set of policies and one appetite for risk. If that lender says no, you start again.

Call one of our team or book an appointment at a time that works for you. We'll review your situation, identify any potential issues before they become problems, and structure your application to suit the lender most likely to approve it.

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