How to Improve Your Chances of Getting a Home Loan Approved
For most of us, buying a home is one of life’s biggest milestones—and one of the most expensive. Unless you’ve just hit the jackpot or inherited a fortune, chances are you’ll need a home loan to help you cover the cost. But here’s the reality: just because you’re ready to buy doesn’t mean the bank is ready to lend.
Getting a home loan approved isn’t always easy. Lenders look at a long list of things, your credit score, income, job history, spending habits, debts, savings, and even the property itself. It can feel like jumping through hoops, but the good news is, there are ways to boost your chances before you even submit the application.
Let’s walk through some practical, straightforward steps you can take to help make your home loan journey smoother—and increase the odds of hearing that magical word: approved.
1. Understand What Lenders Are Looking For
Before you dive into applications, it’s worth understanding what banks and lenders actually want to see. They’re not just giving out money because you ask nicely, they want to feel confident you’ll pay it back.
Generally, lenders look for:
- A strong credit history
- Stable income and employment
- A manageable level of existing debt
- A decent deposit (down payment)
- A realistic loan amount based on your income
Knowing these basics gives you a head start and helps you identify what areas you might need to improve.
2. Check Your Credit Score (and Fix It If Needed)
Your credit score is one of the first things lenders check—it’s a snapshot of how responsible you’ve been with credit in the past. A good score gives them peace of mind that you’ll make your repayments on time.
If you haven’t checked your credit score recently, do it now. In Australia, you can access your score for free through agencies like Equifax, Experian. If your score is low due to missed payments or defaults, take some time to improve it before applying. Even simple things like paying off your credit card in full each month can help.
3. Save a Bigger Deposit
The more money you can put toward your home up front, the better your chances of approval. A bigger deposit means you’ll need to borrow less—and that makes you less risky in the eyes of the bank.
Ideally, aim for at least 20% of the property’s value. This not only improves your odds of approval but also helps you avoid paying lenders mortgage insurance (LMI), which can save you thousands in the long run.
But even if you can’t hit 20%, don’t worry—some lenders accept deposits as low as 5–10%. Just be aware it may come with extra conditions or higher interest rates.
4. Keep Your Job and Income Stable
One of the biggest green flags for lenders is stable employment. If you’ve been in your current role for over a year—or at least six months—it shows consistency, which banks love.
If you’re self-employed, it gets a bit trickier. You’ll usually need to show at least two years of business income and provide detailed financials. So, the more organised your records are, the better your application will look.
And now might not be the best time to switch careers or go freelance. If you’re planning to apply for a loan soon, keep your income as predictable as possible.
5. Reduce Your Debts (Even the Small Ones)
Credit cards, personal loans, car finance—these can all weigh down your borrowing power. Lenders will calculate your debt-to-income ratio (how much you owe compared to what you earn) to see if you can handle more debt.
Paying off or at least reducing your existing debts before applying is one of the fastest ways to improve your position. Even unused credit cards can count against you, so consider closing any accounts you don’t really need.
6. Don’t Apply for Other Credit Around the Same Time
Every time you apply for a loan or credit card, it leaves a mark on your credit report—even if you don’t get approved. Too many recent applications can make it look like you’re desperate for cash, and that’s a red flag to lenders.
In the few months before applying for a home loan, avoid new credit applications altogether if you can.
7. Get Pre-Approved for a Loan First
Before you fall in love with a property, get pre-approved. Pre-approval is like a green light from the bank saying, “Yes, we’ll probably lend you this much.”
It’s not a guarantee, but it shows real estate agents and sellers you’re serious. Plus, it helps you stick to a realistic budget and saves time when it’s time to make an offer.
8. Get Your Documents in Order
The home loan process involves a decent amount of paperwork, so being organised can give you a real edge. Common documents you’ll need include:
- Payslips and employment letters
- Tax returns (especially if self-employed)
- Bank statements
- Identification
- Proof of savings and debts
The fewer back-and-forth emails with your lender, the quicker things move—and the less chance of delays or issues.
9. Use a Loan Comparison Tool or Expert Help
Not all home loans are the same. Different lenders offer different rates, rules, and approval criteria. So it makes sense to compare your options before settling on one.
You don’t have to do it all on your own either. Some Australians use smart online platforms like Koalify to find home loan options that suit their situation. These kinds of tools can save you time and help you avoid applying with lenders who might not be the right fit.
10. Consider a Guarantor or Co-Borrower If Needed
If your application isn’t quite strong enough—maybe due to a short work history or limited deposit—you might still have options.
Having a family member act as a guarantor or applying with a partner as a co-borrower can increase your borrowing power and improve your chances of approval. But keep in mind that it’s a big responsibility for everyone involved, so make sure everyone’s on the same page.
11. Be Honest on Your Application
It might be tempting to “tweak” your income or leave out certain debts, but honesty is key. Lenders will cross-check your documents, and if they find inconsistencies, it can hurt your chances.
Be upfront, answer all questions truthfully, and provide accurate documents. Transparency helps build trust—and that goes a long way.
Final Thoughts
Getting approved for a home loan doesn’t happen by luck—it happens through preparation. From managing your credit score and saving a bigger deposit to reducing debt and choosing the right lender, every small decision adds up.
Remember, lenders aren’t looking for perfection—they’re looking for stability, responsibility, and clear signs that you’re ready to take on a mortgage. Take your time, do your research, and don’t hesitate to get support along the way.
With the right approach, you’ll go from “just browsing” to holding the keys to your new home.