Applying for a home loan can be exciting, but it can also be stressful, especially if your application doesn’t go to plan. The truth is, not every home loan application is approved. But the good news? Most issues can be avoided with the right guidance and preparation.
Here are the most common reasons home loans are declined and what you can do to make sure your application goes smoothly from the star
🚫 Top Reasons Home Loans Get Declined
1. Not Enough Deposit
Lenders usually want to see at least 5–10% genuine savings, and ideally 20% to avoid paying Lender’s Mortgage Insurance (LMI). If you don’t meet the deposit requirements, it may be a red flag to lenders.
What to do:
Work with a broker to explore options like guarantor loans, gifted deposits, or savings plans to get you loan-ready faster.
2. Poor Credit History
Late payments, defaults, or too many credit enquiries can hurt your credit score and make lenders nervous.
What to do:
Check your credit report before applying and clear up any issues. A broker can help match you with lenders who are more understanding of past credit challenges.
3. Unstable Employment
Lenders like to see stable, consistent income. If you’ve just started a new job, are self-employed, or work casually, it could complicate your application.
What to do:
Some lenders are more flexible than others. A broker will know which lenders accept your employment type and how long you need to be in the role.
4. Too Much Existing Debt
High credit card limits, car loans, Afterpay, or personal loans can reduce your borrowing power even if you’re making repayments on time.
What to do:
Reduce or pay out debts where possible before applying. Don’t forget: lenders assess your limit, not just your balance.
5. Inconsistent or Undisclosed Information
Mistakes or missing information in your application (like forgetting a loan, underestimating expenses, or not declaring dependents) can cause delays or declines.
What to do:
Be honest and accurate, and let your broker guide you through every document to make sure it’s all in order before submission.
✅ How to Give Your Application the Best Chance
- Speak to a mortgage broker first
A good broker will assess your situation upfront, help with paperwork, and match you with the right lender based on your unique profile. - Get your documents ready
Make sure you have your ID, payslips, bank statements, and other key paperwork ready. Missing documents means delays. - Don’t apply to multiple lenders at once
Every application leaves a mark on your credit file. Let a broker do the comparisons without damaging your score. - Avoid big financial changes during the process
Try not to change jobs, open new credit cards, or take on other debt while you’re applying.
🤝 Final Word
Most declines are preventable, and that’s why using a mortgage broker can make all the difference. At Mynt Financial, we know the lender policies inside out, and we help you avoid the traps that cause most people to stumble.
Whether it’s your first home, next move, or refinance, we’re here to help make your application smooth and stress-free.
Disclaimer: The information provided in this article is general in nature and does not constitute financial advice. You should consider your individual circumstances and seek advice from a qualified mortgage broker, financial adviser, or tax professional before making any decisions.
