Aug 1, 2025
Applying for a home loan is one of the biggest financial steps many Australians will ever take. Whether you're a first-time buyer, upgrading to a bigger home or refinancing an existing loan, avoiding a few common mistakes can save you time, money and frustration. Here are the top mistakes to avoid when applying for a home loan and how you can sidestep them for a smoother approval journey.
🚫 1. Not checking your credit score in advance
Your credit score is a key factor lenders use to assess your risk level. A low or inconsistent credit score can mean higher interest rates or loan denial. ✅ What to do instead: Before you even talk to a lender, request your free credit report from Equifax, Experian, or illion (you are entitled to one free report per year from each agency). Check for errors, unpaid debts or outdated information that could be impacting your score and take steps to improve it if necessary -such as paying down debts or correcting any inaccuracies.
🚫 2. Applying without pre-approval
Shopping for homes without knowing your borrowing power is like shopping without a budget. You might fall in love with a property you can’t afford, leading to disappointment and wasted time.
✅ What to do instead:
Secure a pre-approval from a lender before you begin your house-hunting journey. Pre-approval gives you a realistic price range, shows sellers you’re serious and speeds up the final approval process once you make an offer.
🚫 3. Making large purchases or changing jobs mid-application
Lenders value stability. Big changes in your finances (e.g., buying a car on finance) or employment (e.g., switching to a new job or going freelance) during the home loan process can impact your loan approval or delay it significantly.
✅ What to do instead:
Wait until your home loan has settled before making any major life or financial changes. Lenders typically reassess your circumstances just before settlement, and instability could be a red flag.
🚫 4. Overestimating borrowing capacity
Just because a lender approves you for a high loan amount doesn't mean it’s wise to borrow the maximum. This can leave you financially stretched, especially if interest rates rise or life circumstances change.
✅ What to do instead:
Work with a mortgage broker to calculate a realistic repayment amount based on your current lifestyle, future goals, and potential interest rate changes. Always allow room in your budget for unforeseen expenses.
🚫 5. Not comparing lenders and loan products
Every lender has different interest rates, fees, loan features, and approval criteria. Applying directly to one bank may limit your options and cost you more in the long run.
✅ What to do instead:
Engage a mortgage broker like Select Loan and Mortgage. We compare multiple lenders—including major banks, credit unions, and non-bank lenders—to help you find a product that suits your goals and financial profile.
🚫 6. Providing incomplete or inaccurate documentation
Missing payslips, incorrect ID details, or inconsistent financial information can stall the application process or worse, lead to rejection.
✅ What to do instead:
Make a checklist of all required documents and review everything before submitting. Common documents include:
Payslips and employment details
Bank statements
ID (driver’s license, passport)
Existing liabilities (credit cards, car loans, HECS/HELP)
Respond promptly to any requests from your broker or lender.
🚫 7. Not factoring in all costs
Many buyers only budget for the deposit and monthly repayments. But home ownership comes with several additional costs that can catch you off guard.
✅ What to do instead:
Speak to your broker to understand the true cost of buying a home. These may include:
Stamp duty
Legal/conveyancing fees
Building and pest inspections
Lenders Mortgage Insurance (LMI) if borrowing more than 80% of the property value
Moving costs and council rates
🚫 8. Ignoring timely bill payments
Your repayment history is one of the most important factors lenders consider when assessing your home loan application. Even a single missed or late payment on your credit card, phone bill or utility account can negatively impact your credit score and in some cases, reduce your borrowing power. Late payments raise red flags for lenders, suggesting you may struggle with making regular mortgage repayments in the future.
✅ What to do instead:
Stay on top of all your financial obligations. Set up automatic payments or reminders to ensure you never miss a due date. If you’re working to improve your credit score before applying, maintaining a perfect repayment record is a great place to start.
🚫 9. Overlooking the importance of location
While it's easy to fall in love with a property’s features or price tag, many buyers forget that location is just as important -if not more. A great home in the wrong area can lead to daily inconveniences and long-term regrets.
Think about how far the property is from your workplace, schools, public transport, shops and healthcare. Also, consider the area's future development plans, infrastructure upgrades, and the potential for capital growth, as this can directly influence your property's resale value.
✅ What to do instead:
Research the suburb thoroughly before making a decision. Use tools like realestate.com.au or Domain Suburb Profiles to understand market trends and growth prospects. Visit the area at different times of the day to get a feel for the neighbourhood and its amenities.
🚫 10. Not planning for future life changes
Many homebuyers only consider their current lifestyle and needs, overlooking how their situation might evolve. A property that fits your life today may not suit you in 5 or 10 years.
You may eventually need more space for a growing family, or prefer a layout better suited to ageing in place. Some properties also have limited flexibility for extensions or renovations down the track.
✅ What to do instead:
Think long-term. Ask yourself: Will this home still meet my needs in a few years? Is there space to grow or adapt if circumstances change? Choosing a flexible property now can save you the hassle and cost of moving again too soon.
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🏡 Need help navigating the Home Loan process?
At Select Loan and Mortgage, we compare over 25 lenders to find the right fit for you. From application to approval, we guide you every step of the way and help you make informed decisions.
📌 Final Tip:
Each loan application is unique. Partnering with a knowledgeable broker and avoiding common errors can significantly improve your chances of a smooth approval. Please be aware that your complete financial circumstances must be assessed before any offer or product can be provided.
