Applying for a home loan: The moves that matter most
Written and accurate as at: Feb 11, 2026 Current Stats & Facts
There’s more to getting a home loan than saving up a deposit. You’ll need to jump through plenty of hoops to prove to your lender that you’ll be a responsible borrower, and that applies even if your finances are generally in good shape.
Below are some practical ways to improve your chances, based on the things lenders like to see and the things that tend to set off alarm bells.
Think like a bank
When a bank issues a home loan, it’s taking a bet on two things: the borrower and the property. From their perspective, it’s not good business to lend out money when there’s a strong likelihood they won’t get it back.
To assess that risk, banks rely on a handful of key metrics. One of the most important is your Loan-to-Value Ratio. A low LVR means you’re borrowing less relative to the value of the property, either by having a larger deposit or not borrowing at the very top of your limit.
Another measure is your Debt-to-Income ratio, which weighs up the amount you want to borrow against the money you earn. While different lenders will have different standards, a DTI above six is generally seen as higher risk.
As for the property, lenders prefer homes that are easy to value and sell if you wind up defaulting on your loan. That’s why some dwellings – like studio apartments, which aren’t always considered ideal security – attract more scrutiny.
Know what you can afford
It’s typical for home loan applicants to have their entire financial life put under a microscope. Banks will want to know about your income, existing debts and how much you spend each month. They’ll also stress-test your budget to see whether you can continue making repayments if interest rates go up.
All this is designed to get a sense of what type of borrower you’ll be. Regular overspending and missed bills can all work against you, while consistently spending less than you earn is generally viewed as a positive sign.
That said, there’s a limit to how far being frugal will get you. Many banks apply a minimum benchmark for living expenses based on factors like household size, location and income. If the expenses you declare are lower, your bank might simply adjust them upward in their calculations.
Use credit sparingly
Credit cards, personal loans and Buy Now Pay Later services can all affect how much a bank is willing to lend you. Credit cards in particular can be tricky, as banks usually base their assessment on the card’s limit rather than the actual balance.
That means a card with a $20,000 limit can reduce your borrowing capacity by $20,000, even if you rarely use it or pay it off in full each month. To give yourself the best possible chance, think about lowering your card’s limit. This leaves you with access to credit while reassuring the bank you won’t use too much.
Have a consistent employment history
Timing matters when applying for a loan, and if you’ve been in your job for a while it will inspire more confidence than if you’re still on probation. Recent job changes aren’t necessarily a deal-breaker, especially if you’re still in the same industry, but they can raise some questions.
It’s also worth mentioning that earnings from casual work or side hustles are generally seen as less dependable than a full-time salary. These can be excluded, especially if they're very inconsistent, you haven’t been trading for long, or you’ve failed to keep records or declare the income on your tax return.
As for income from overtime work, you might find it’s subject to ‘shading’ – meaning lenders won’t count its full value. So if your base salary is $70,000 and you earn an extra $20,000 in overtime pay, your bank might discount 20% from the latter, putting your income at $86,000.
Make sure your credit profile is squeaky clean
Your credit report is a go-to source for banks trying to gauge your creditworthiness. Missed payments and defaults can all set your application back, even if they seem minor or occurred a while ago.
Before applying, consider checking your credit report yourself by contacting one of the three credit reporting bodies in Australia (Equifax, Illion or Experian). If there are any errors, you can request that they or the credit provider involved investigate and correct them.
Beyond that, make sure all bills and loan repayments are up to date, and try to avoid applying for new credit in the months leading up to your home loan application. Each enquiry leaves a footprint, and too many in a short period can suggest you’re desperate for credit and potentially financially distressed.
Ultimately, getting your home loan application over the line requires proving to your lender that you’re responsible, disciplined and generally well-prepared for the long-term commitment of a mortgage.