Being turned down for a home loan — or not knowing if you'll qualify — is one of the most stressful parts of the property journey. The good news is that lender criteria aren't a mystery. Once you understand what they're looking at, you can address any weak spots before you apply.
Lenders want to see that you earn enough to comfortably service the loan. But it's not just the amount — it's the type and stability of income. PAYG employees with at least 3 months in a job are easiest to assess. Casual, contract, and self-employed income requires more documentation and may be treated more conservatively (often averaged over 2 years).
Your credit score (accessed from Equifax, Experian, or Illion) reflects your history of repaying debts. Most lenders want a score above 600, with major banks typically preferring 700+. A low score doesn't automatically disqualify you — some specialist lenders work with impaired credit — but it will limit your lender options and may result in a higher rate.
💡 Check your credit score for free at CreditSavvy or Equifax before applying. Errors on your credit file are more common than you'd think and can be corrected.
Most lenders require a minimum 5% deposit, but 20% is the magic number that avoids Lenders Mortgage Insurance (LMI). LMI is a one-off insurance premium that protects the lender (not you) if you default — it can add $10,000–$40,000 to your loan cost depending on the purchase price.
Some first home buyer schemes allow you to buy with as little as 5% without LMI — a broker can advise if you qualify.
Every debt you have reduces what you can borrow. This includes car loans, personal loans, credit cards (by limit, not balance), buy-now-pay-later accounts, and HECS/HELP debt. Lenders add up all your committed repayments and subtract them from your disposable income before assessing the loan.
Lenders use the Household Expenditure Measure (HEM) as a minimum benchmark for living costs. They'll either use your declared expenses or HEM — whichever is higher. Being accurate (not inflated) with your expenses matters, but outright underestimation is both risky and detectable through bank statement analysis.
Not all properties are created equal in a lender's eyes. High-rise apartments (especially those under 50sqm), properties in remote areas, and unusual property types (like studios or serviced apartments) may attract lower LVR limits or be rejected altogether by some lenders. This is where lender choice becomes critical.
⚠️ Don't apply blind: Every home loan application leaves a mark on your credit file. Multiple declined applications in a short period can significantly damage your score. Talk to a broker first — they'll identify the right lender before you apply.
Use our free eligibility checker to get an instant score across the key criteria — no credit check, no sign-up.