Stuff to know about your home loan application (2023)

Thinking of buying your first home? Want to refinance or have plans to invest? One of the steps weighing on your mind may be the application process. To help guide you through the home loan application process, we’ve set out some of the key things that lenders look out for when they are assessing applications. Check out our list below to see some things to consider:

Your income and work situation

A steady source of income is an important indication to a lender that you can afford to repay a loan. Not only this, but your type of employment is also an important factor for lenders.

PAYG employees

Lenders will usually require that you have been employed in the job for between 6 to 12 months and will generally require you to provide recent payslips to prove your employment status and to make sure you earn as much as you claim to.

Part-time, casual or seasonal employees

People in these roles could face greater challenges getting a home loan, however, applications will be assessed on their merits, taking into account your overall financial position and employment history.


It has traditionally been more difficult for business owners to get a home loan, because it can be hard to provide proof of income. Plus, cash flow can be irregular. Since you do not have PAYG payslips, lenders will want to see alternative documents like Business Activity Statements, tax returns or a letter from your accountant. You will also generally need to have at least 2 years trading in the current business behind you. Depending on your situation, it may be necessary to apply for a special type of low documentation home loan. If you’re having trouble getting a loan, there are lenders who specialise in providing loans to the self-employed.

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Extra sources of income

To determine your ability to service a loan, lenders will also assess additional sources of income such as:

Overtime pay – evidence from the last 2 years of payslips will be required to demonstrate you much overtime you’re likely to work.

Rental income – lenders generally accept up to 80% of the income from investment properties as income that can be counted towards a potential borrower’s net income.

Share dividends – some lenders accept a portion of share dividends as income.

Fringe benefits – things like a living allowance or car allowance may be added to your gross taxable income.

Centrelink benefits – Certain benefits such as child support, carers’ allowance, disability pension, age pension, foster care allowances and some others can be accepted as income by many lenders.

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Check your credit score

In today’s tight credit environment, your credit history has become more important than ever. Before they approve a loan, lenders will take a look at your credit score. And so should you.

The score takes into account things like the size and type of your outstanding debt, the number of credit applications you’ve made, how long you’ve lived at your current address, any bankruptcies or court writs against you, and looks at your payment history – including any overdue debts, missed repayments or serious credit infringements. Your score can impact the amount you can borrow and the interest rate you’ll pay.

One thing to take note of with your credit score is to avoid sending home loan applications to lots of lenders, or making multiple credit card applications. It could reduce your credit history or worthiness, because failed or withdrawn applications may show up as credit refusals.

Look at ways to pay down your debt

Banks refer to your debt as liabilities and will look at things like credit cards, personal and car loans and HECS or other student loans as debt. Lenders will assess these closely when they are considering your ability to pay off a home loan.

Before applying for a loan, it’s important to start paying these debts down as much as possible, and not apply for any large loans or new credit cards.

When it comes to credit cards, consider cancelling any high limit credit cards you may have, or reducing the credit limit. Because when it comes to assessing your liabilities, banks look at the credit card limit – not the balance owing. If you’re not using the credit, lose it.

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Your expenses and getting on top of them

Lenders will also assess your monthly expenses, sometimes right down to things like Netflix, Foxtel and Spotify payments. Some will ask for a rough estimate of your weekly or monthly expenses, while others will provide detailed calculators.

What lenders are trying to determine is your disposable income. Or, in other words, the income that doesn’t go toward bills, household necessities, groceries and discretionary spending.

Taking stock of your finances

To get on top of your expenses, it’s a good idea to look at what you spend each month and plan a budget. This exercise will not only help you identify areas where you can save, but also help you see what size home loan you can comfortably afford.

Add up how much you spend each month on everything from public transport to petrol and tolls, food and groceries to coffees and clothes. Then add any regular payments you make –mobile, Internet, pay TV, credit card, insurances, child care, utilities, AfterPay or Zip Pay, car rego and incidentals like medical expenses (divide any annual, half yearly or quarterly payments on this list by 12, 6 or 3 respectively).

This should give you a monthly spending figure. From there you can see how much you have left over for home loan repayments each month. Then, using our repayment calculator, you can figure out what your monthly repayments would be on different sized loans, to see what you can afford and how you need to budget.

Your assets and your deposit

Any savings you have, other properties or vehicles you own, shares and superannuation are all regarded as assets by a lender and will be taken into account.

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Another thing that will be viewed as an asset is having a deposit saving plan. Part of your deposit can be gifts, financial windfalls or inheritances, but most lenders will want to see that at least 5% of the deposit consists of genuine savings – that is savings held in your account for at least three months, with a regular pattern of deposits. Lenders like to see this because it demonstrates that you have financial discipline.

Most lenders are now asking for a minimum deposit of 20% of the property’s purchase price. A deposit of 20% or more means you generally won’t have to pay Lender’s Mortgage Insurance (LMI) – insurance that helps protect your lender in the event you default. LMI can add thousands of dollars to the cost of your loan.

A guarantor

One way to get a home loan without a deposit is to have someone guarantee your home loan – usually a family member. But make sure your potential guarantor knows what they’re getting into and seeks their own financial and legal advice before they agree. Being a guarantor on a loan means the guarantor is offering their own property as security for your home loan, eliminating the need for a deposit. However, this means the guarantor’s property is at risk if you default.

Chat with our home loan specialists

Got more questions or like to apply for an ING home loan? Our home loan specialists are here to help. We can talk you through the process, calculate how much you could borrow and what your repayments would be and, should you be ready, start your application online or over the phone. Our specialists will then stay by your side all the way to settlement, while we also keep you up-to-date on your application’s progress by SMS and email, or you can track it online.

To talk to a home loan specialist,
simply call 1800 100 258, 8am – 8pm AEST, Monday to Friday or 9am – 5pm AEST on Saturday.

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The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. Deposit products, savings products, credit card and home loan products are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL and Australian Credit Licence 229823. ING Living Super (which is part of the ING Superannuation Fund ABN 13 355 603 448) is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by ING Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096. ING Insurance is issued by Auto & General Insurance Company Limited (AGIC) ABN 42 111 586 353 AFSL Licence No 285571 as insurer. It is distributed by Auto & General Services Pty Ltd (AGS) ABN 61 003 617 909 AFSL 241411 and by ING as an Authorised Representative AR 1247634 of AGS. All applications for credit are subject to ING's credit approval criteria, and fees and charges apply. You should consider the relevant Product Disclosure Statement, Terms and Conditions, Fees and Limits Schedule, Financial Services Guide, Key Facts Sheet and Credit Guide available at when deciding whether to acquire, or to continue to hold, a product. Before interacting with us via our social media platforms, please take a minute to familiarise yourself with our Social Media User Terms


What are the 6 items that trigger a loan application? ›

Once these 6 pieces of information are submitted a creditor MUST supply a Loan Estimate for approved loans within 3 business days.
Making sure that you submit these 6 pieces of information is vital:
  • Name.
  • Income.
  • Social Security Number.
  • Property Address.
  • Estimated Value of Property.
  • Mortgage Loan Amount sought.

What are 3 things lenders look for? ›

Know what lenders look for
  • Credit history. Qualifying for the different types of credit hinges largely on your credit history — the track record you've established while managing credit and making payments over time. ...
  • Capacity. ...
  • Collateral (when applying for secured loans) ...
  • Capital. ...
  • Conditions.

What should I know before applying for a loan? ›

So, take the time to examine these six aspects before applying for a personal loan:
  1. Maintain a good credit history. ...
  2. Compare the interest rates in the market. ...
  3. Assess all costs. ...
  4. Consider your needs to choose the right loan amount. ...
  5. Evaluate your ability to repay the loan. ...
  6. Avoid falling for gimmicky offers and plans.

How much income do you need to qualify for a $400000 home loan? ›

What income is required for a 400k mortgage? To afford a $400,000 house, borrowers need $55,600 in cash to put 10 percent down. With a 30-year mortgage, your monthly income should be at least $8200 and your monthly payments on existing debt should not exceed $981. (This is an estimated example.)

What are 3 items needed to be approved for a mortgage loan? ›

Requirements for Pre-Approval
  • Proof of Income. Potential homebuyers must provide W-2 wage statements and tax returns from the past two years, current pay stubs that show income and year-to-date income, and proof of additional income sources such as alimony or bonuses.
  • Proof of Assets. ...
  • Good Credit.

What are red flags in the loan process? ›

General Red Flags

verifications that are completed on the same day as ordered or on a weekend/holiday. homeowner's insurance is a rental policy. different mailing addresses on bank statements, pay stubs and W-2s. assets are not consistent with the income.

What is the 3 7 3 rule in mortgage? ›

Timing Requirements – The “3/7/3 Rule”

The initial Truth in Lending Statement must be delivered to the consumer within 3 business days of the receipt of the loan application by the lender. The TILA statement is presumed to be delivered to the consumer 3 business days after it is mailed.

What is the 7 day closing rule? ›

Under the TRID rule, the creditor must deliver or place in the mail the initial Loan Estimate at least seven business days before consummation, and the consumer must receive the initial Closing Disclosure at least three business days before consummation.

What are the 3 C's for a loan? ›

Character, capital (or collateral), and capacity make up the three C's of credit. Credit history, sufficient finances for repayment, and collateral are all factors in establishing credit. A person's character is based on their ability to pay their bills on time, which includes their past payments.

What are the 4 C's that lenders are looking at? ›

Standards may differ from lender to lender, but there are four core components — the four C's — that lender will evaluate in determining whether they will make a loan: capacity, capital, collateral and credit.

What are the 5 C's of lending? ›

What are the 5 Cs of credit? Lenders score your loan application by these 5 Cs—Capacity, Capital, Collateral, Conditions and Character. Learn what they are so you can improve your eligibility when you present yourself to lenders.

What are basic 5 documents required for loan? ›

Documents required
  • Identity proof / address proof (copy of passport/voter ID card/driving license/Aadhaar Card)
  • Bank statement of previous 3 months (Passbook of previous 6 months)
  • Two latest salary slip/current dated salary certificate with the latest Form 16.

Why would a loan application be rejected? ›

The most common reasons for rejection include a low credit score or bad credit history, a high debt-to-income ratio, unstable employment history, too low of income for the desired loan amount, or missing important information or paperwork within your application.

What should you not do in a loan process? ›

Here's what you need to know.
  1. Not Shopping Around to Lenders. ...
  2. Paying Off Debt. ...
  3. Quitting Your Job. ...
  4. No Cash for Closing. ...
  5. Accepting Undocumented Cash. ...
  6. Not Checking Your Credit Report in Advance. ...
  7. Co-signing Other Loans. ...
  8. Not Getting Pre-Approved.
May 3, 2022

How much is a downpayment on a 200k house? ›

Conventional mortgages, like the traditional 30-year fixed rate mortgage, usually require at least a 5% down payment. If you're buying a home for $200,000, in this case, you'll need $10,000 to secure a home loan.

How much income do you need to qualify for a $300 000 mortgage? ›

How much do I need to make for a $300,000 house? A $300,000 house, with a 5% interest rate for 30 years and $15,000 (5%) down will require an annual income of $77,087. This calculation is for an individual with no expenses.

How much is a downpayment on a 500k house? ›

For a home price of $500,000 the minimum down payment would be $17,500.

What makes you get denied for a mortgage? ›

Most often, loans are declined because of poor credit, insufficient income or an excessive debt-to-income ratio. Reviewing your credit report will help you identify what the issues were in your case.

What can get you denied for a mortgage? ›

Common reasons for a declined mortgage application and what to do
  • Poor credit history. ...
  • Not registered to vote. ...
  • Too many credit applications. ...
  • Too much debt. ...
  • Payday loans. ...
  • Administration errors. ...
  • Not earning enough. ...
  • Not matching the lender's profile.

What credit score is good to buy a house? ›

It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly payments.

Is it hard getting a FHA loan? ›

It's easier to qualify for an FHA loan than for a conventional loan, which is a mortgage that isn't insured or guaranteed by the federal government. FHA loans allow for lower credit scores than conventional loans and, in some cases, lower monthly mortgage insurance payments.

What not to do during underwriting? ›

Tip #1: Don't Apply For Any New Credit Lines During Underwriting. Any major financial changes and spending can cause problems during the underwriting process. New lines of credit or loans could interrupt this process. Also, avoid making any purchases that could decrease your assets.

During which stage is the loan approved or denied? ›

Underwriting Decision

With everything reviewed, the underwriter approves or rejects the loan.

Can you be denied at closing? ›

Yes. Many lenders use third-party “loan audit” companies to validate your income, debt and assets again before you sign closing papers. If they discover major changes to your credit, income or cash to close, your loan could be denied.

Can I get a mortgage 5 times my salary? ›

Yes, if your circumstances allow for you to meet eligibility criteria for a lender with 5.5 or even 6 x salary income multiples, then you could. The lending criteria for such lenders may be more demanding, requiring you to have a specific credit score, a larger deposit or an income above a certain threshold.

What is the 1/12 rule in mortgage? ›

Making an extra mortgage payment each year could reduce the term of your loan significantly. The most budget-friendly way to do this is to pay 1/12 extra each month. For example, by paying $975 each month on a $900 mortgage payment, you'll have paid the equivalent of an extra payment by the end of the year.

How soon after closing do I get the keys? ›

“Key” Takeaways

Granted, unless you are closing after the Register of Deeds has closed for the day, you should realistically get your keys the same day as closing day. However, it may be a couple of hours after you have signed before the Register of Deeds records the Deed giving you possession of the house.

Do lenders pull credit day of closing? ›

Q: Do lenders pull credit day of closing? A: Not usually, but most will pull credit again before giving the final approval. So, make sure you don't rack up credit cards or open new accounts.

What do lenders check before closing? ›

Lenders want to know details such as history of your residence, employment and income, account balances, debt payments, confirmation of any foreclosures or bankruptcies in the last seven years and sourcing of a down payment.

What is a good credit score? ›

Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.

What habit lowers your credit score? ›

Some of the most common bad credit habits include: Not checking your credit regularly. Paying late or less than the minimum on your debts. Not reading your credit card statements.

Does a cosigner make payments lower? ›

Does having a cosigner lower car payments? Having a cosigner can help reduce your car payment. If the cosigner helps you qualify for lower interest rates, your monthly payment could be lower. Alternatively, you can reduce your payments by spreading out the loan term over a longer number of years.

What do underwriters look for loan approval? ›

Let's discuss what underwriters look for in the loan approval process. In considering your application, they look at a variety of factors, including your credit history, income and any outstanding debts. This important step in the process focuses on the three C's of underwriting — credit, capacity and collateral.

What does PMI stand for mortgage? ›

Private mortgage insurance, also called PMI, is a type of mortgage insurance you might be required to pay for if you have a conventional loan. Like other kinds of mortgage insurance, PMI protects the lender—not you—if you stop making payments on your loan.

What are the three major factors that you will consider before lending? ›

Lenders consider your credit score, payment history and the current economic conditions when determining interest rates. Generally speaking, the higher your credit score, the less you can expect to pay in interest.

What is the 15 3 payment trick? ›

The 15/3 credit card payment rule is a strategy that involves making two payments each month to your credit card company. You make one payment 15 days before your statement is due and another payment three days before the due date.

What salary is required for home loan? ›

Home Loan Eligibility Criteria

Age Limit for Self-Employed Individuals: 21 to 65 years. Minimum Salary: ₹10,000 p.m. Minimum business income: ₹2 lac p.a. Maximum Loan Term: 30 years.

How much home loan can I get if my salary is 20000? ›

Home loan amount on a Rs 20,000 monthly salary

The general rule says that people with salaried jobs qualify for home loans up to 60 percent of their in-hand monthly income. Therefore, a person earning Rs 20,000 net monthly income can be eligible for a home loan of Rs 10-12 lakh.

How do I know if my mortgage will be approved? ›

How do I know if I'll get approved for a mortgage?
  1. Your credit score is above 620.
  2. You have a down payment of 3-5% or more.
  3. Your existing debts are low.
  4. You've had a stable job and income for at least two years.
Jan 7, 2022

At what stage can a mortgage be declined? ›

The stages at which mortgages can be declined are: Mortgage not applied for (bank or broker has told you that you won't qualify) A decision in principle declined. Refused after a decision in principle is approved.

What is the best time to apply for a loan? ›

The best time to apply for a loan depends on your circumstances. There is no one perfect season to apply. We do not approve more loans in the spring than the summer. Instead, you want to take a look at your personal finances to determine when you should apply for a loan.

What 4 things should you consider before taking out a loan? ›

5 Things to Know Before Your First Loan Application
  • Credit score and credit history. A good credit score and credit history show lenders that you pay your credit obligations on time. ...
  • Income. ...
  • Monthly debt payments. ...
  • Assets and additional applicants. ...
  • Employer's contact information.
Jan 31, 2022

Can I be denied a mortgage after being pre-approved? ›

Yes, it's possible to have your loan application denied after getting preapproved for a mortgage. It doesn't seem fair, but the reason this is possible is because your loan has to go through the underwriting process before it's finalized.

Can you use your credit card while closing on a house? ›

Making a Large Purchase on Your Credit Card

Yes, you can use your credit card before your closing date, but do your best to keep your purchases small and pay off your balance swiftly.

What matters most when applying for a mortgage? ›

When it comes to getting a lender's approval to buy or refinance a home, there are 3 key numbers that affect your ability to qualify for a mortgage and how much it will cost you — your credit score, debt-to-income ratio, and loan-to-value ratio.

What is the most important factor when selecting a home loan? ›

Your credit score

When you apply for a mortgage, checking your credit score is one of the first things most lenders do. The higher your score, the more likely it is you'll be approved for a mortgage and the better your interest rate will be.

What increases your chances of getting a home loan? ›

Build and maintain a good credit score

For most loan types, a credit score of at least 620 is required. The higher your score, the more mortgage options you'll have. Meaning various loan terms and potentially lower interest rates. If you want the best possible rates, aim for a score of 740 or higher.

What are the main factors that go into getting approved for a home loan? ›

Let's begin by looking at the major factors lenders first consider when they decide whether you qualify for a mortgage or not. Your income, debt, credit score, assets and property type all play major roles in getting approved for a mortgage.

What are three common mortgage mistakes? ›

Take a look at these 10 common mortgage mistakes to help ensure they don't cost you the home of your dreams.
  • Not Getting Preapproved. ...
  • Not Checking Your Credit Score First. ...
  • Not Considering Mortgage Insurance. ...
  • Not Shopping Around for a Mortgage. ...
  • Not Keeping Closing Costs and Fees in Mind.
Jan 17, 2023

What should you not say to a mortgage lender? ›

10 things NOT to say to your mortgage lender
  • 1) Anything Untruthful. ...
  • 2) What's the most I can borrow? ...
  • 3) I forgot to pay that bill again. ...
  • 4) Check out my new credit cards! ...
  • 5) Which credit card ISN'T maxed out? ...
  • 6) Changing jobs annually is my specialty. ...
  • 7) This salary job isn't for me, I'm going to commission-based.
Oct 19, 2017

Does 20% down guarantee a mortgage? ›

You no longer need a 20% down payment to buy a home. It's possible to buy a home with as little as 3% down, and you may even be able to buy a home with no money down if you qualify for a VA or a USDA loan.

What are the four C's used to evaluate a loan application? ›

Standards may differ from lender to lender, but there are four core components — the four C's — that lender will evaluate in determining whether they will make a loan: capacity, capital, collateral and credit.

How long does it take for a mortgage to be approved? ›

After having an offer accepted on a property and applying for a mortgage, it can take from two to six weeks to get a mortgage approved. Most mortgage offers are then valid for six months. Getting a mortgage is essential to buying a home.

How likely is my mortgage to be approved? ›

You'll have the best chances at mortgage approval if: Your credit score is above 620. You have a down payment of 3-5% or more. Your existing debts are low.

Are home loans hard to get right now? ›

It's bad enough mortgage rates are over 7% – now it's harder to qualify for a home loan. Mortgage rates are soaring, and credit availability is the lowest it's been in over nine years. The rate on the popular 30-year fixed-rate mortgage is over 7%.

What negatively affects mortgage approval? ›

Some common reasons for a mortgage application to be declined include: Poor credit score. Too much debt. Too many recent credit applications.

Does a pre-approval hurt your credit? ›

A mortgage preapproval can have a hard inquiry on your credit score if you end up applying for the credit. Although a preapproval may affect your credit score, it plays an important step in the home buying process and is recommended to have. The good news is that this ding on your credit score is only temporary.

Why would a bank not approve a home loan? ›

Some of the more common reasons for home loan rejection include: Not having a high enough deposit. Not having a high enough income. Having poor spending habits.


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