Why Home Loans Get Derailed

Market Insights
8 years ago
5 minutes

Buying a property involves a lot of work and getting your property financed isn’t the easiest of those tasks. Often, loan applications get derailed for the smallest of reasons such as a missed utility bill.

Lenders have a duty to lend responsibly and they will reject your application if they think you would be unable to meet your debt obligations in the future. 

What triggers the lenders to reject your loan application?

Credit History

Lenders look for an unblemished credit history and even a small default such as a missed utility payment or unpaid credit can mar your loan application. In fact, big expenses on your credit card during the approval period can also lead to heavy scrutiny of your application.


  1. Make all your payments on time, always.
  2. Pull out your credit report and check it thoroughly. Are there any payments you have made but are not reflected? Fix these issues before making a loan application.
  3. Contact a mortgage broker who can help you with your loan application. Often, a broker can explain your situation better to the lender and increase your chance of approval. 


Job Switch

The size of your income as well as proof of regular income to show that you can afford the loan is important to lenders. In case you are planning to switch jobs, reconsider your decision. Stable employment can be a big factor for your application to succeed. Most banks require that you have been working with the same company for at least a year before you apply.


  1. If you can stay in the job for few months, consider doing so till at least your mortgage is finalised.
  2. Have enough savings to cover your mortgage repayments for the next few months in case the switch doesn’t work. You could calculate your monthly repayments here.

Undeclared expenses or credit cards

Being honest is your best bet when you are applying for a home loan. Any undeclared credit cards, expenses on your child’s education or another debt shouldn’t be hidden from the lender. Your bank statements are going to reveal these expenses anyway and the lender would most probably reject your application for non-disclosure.


  1. Be upfront about your expenses.
  2. Close any existing line of credit before applying for loan, if possible.
  3. If possible, avoid using multiple credit cards when seeking loan approval.


Incomplete paperwork

Paperwork involved while looking for property finance can be humungous. However, it is important to keep your paperwork complete and up to the mark to ensure the success of your application. Many borrowers provide alternate documents such as ATO receipts instead pay slips, which leads to unnecessary to and fro of the application. Filling the application accurately and providing all the right documents at once can make your application breeze through approval.


  1. Be meticulous with your paperwork.
  2. Only provide the documents that the lender has asked for. You can get your application checked by a mortgage broker to be sure.
  3. In case you are self-employed or don’t have proof of regular income, apply for a low-doc loan instead.


Not having enough savings

Gone are the days when you could secure financing for the full value of the property. Today, the max you can get is a 95% LVR loan. Most lenders require you to have genuine savings of at least 5% of the purchase cost.

Not only that, it is prudent to save another 5% to cover up for accessory costs such as stamp duty, lenders mortgage insurance and application fee lest you may fall short of dollars despite having saved the deposit and securing finance for the remaining purchase price.


  1. Make a budget using our online calculator and start saving now to build up a deposit.
  2. Shop around for loans that are maximum LVR but don’t skip on important features you may require.


Choosing the right loan or lender

The first step in choosing the right loan is knowing how much you can borrow. Calculate your borrowing capacity before you apply for a loan to avoid disappointment. 

Don’t just choose the cheapest possible loan and fit your needs around it.”

Once you know how much you can borrow, look around for lenders that fit your bill and not the other way round. You need a lender that offers you the lowest possible rate for the additional features you need such as additional repayments, an offset account or a partially fixed rate. Don’t just choose the cheapest possible loan and fit your needs around it.


  1. Seek pre-approval for your loan. These pre-approvals are valid for 3-6 months and save you the heartache later. However, ensure you go for a proper pre-approval and not just an online pre-approval full of disclaimers.

       2. Compare loan features online and personally contact lenders to get the best deal. Shopping is not always expensive!


At HashChing, we aim to simplify your life by simplifying your home loan. Contact our team of expert mortgage brokers to help you with your mortgage and file that perfect loan application!