What Banks Look for When Approving Your Home Loan in Australia?

Applying for a home loan in Australia can be a big step—and getting approved depends on more than just how much you earn. Lenders assess a range of financial factors to determine whether you’re a safe and reliable borrower. Here’s what banks really look at before saying "yes" to your mortgage.

1. ✅ Your Income and Employment Status

Banks want to know you can comfortably afford your loan repayments. What they assess: - Your total gross and net income - Employment type: full-time, part-time, casual, or self-employed - Employment stability (generally 6+ months in your current role) Tip: Self-employed? Be ready to supply at least 2 years of tax returns or financials.

2. 📈 Credit Score and Credit History

Your credit score gives lenders a snapshot of how you manage debt.

What they check:

Your credit score (typically from Equifax, Experian or illion)
History of repayments (loans, credit cards, bills)
Any defaults, missed payments, or serious credit infringements

Pro Tip: A score above 700 is considered “good” by most lenders.

3. 💳 Existing Debts and Financial Commitments

Banks calculate your debt-to-income ratio to see how much of your income goes toward repayments.

They consider:

Credit cards (even if unused, limits are counted)
Personal/car loans
Buy-now-pay-later services like After pay or Zip
Existing mortgages (if refinancing or investing)

Advice: Lower your credit card limits and close unused accounts before applying.

4. 💰 Savings and Deposit Size

The more savings you have, the better your chances—especially if you’ve saved steadily over time (called genuine savings).

What they like to see:

At least 5–20% deposit (depending on LMI and scheme eligibility)
Savings history over 3+ months
Minimal reliance on gifts or grants

5. 🧾 Living Expenses and Budgeting

Banks want to make sure you can comfortably manage loan repayments after covering everyday expenses.

They’ll ask about:

Rent, groceries, utilities, insurance
Subscriptions, memberships, lifestyle spending
Dependants (kids, partner, etc.)

You’ll need to provide bank statements showing how you spend and save.

6. 🏦 Loan Type, Term, and Structure

Lenders consider the type of loan you're applying for, including:

Fixed vs variable rate loans
Loan term (e.g., 25 vs 30 years)
Whether it’s interest-only or principal + interest
Any guarantor support

Certain structures may impact your borrowing capacity.

7. 📋 Supporting Documents

Banks require documentation to verify all the above. Be prepared with:

ID (driver’s licence, passport)
2–3 recent payslips
Bank statements (3–6 months)
Tax returns (if self-employed)
Property contract (if applicable)

Final Thoughts: Be Loan-Ready

Understanding what banks assess during a home loan application helps you prepare better, reduce risk, and potentially secure a lower interest rate.