12 things to do before applying for a home loan to maximise your chance of approval

What to do before applying for a home loanTwo questions tend to cause the most stress when looking for your new home: Will I get that dream home and will my home loan be approved?

There is only so much you can do to get the property you want, but there are things you can do to make yourself more desirable to a lender. These include checking your credit rating and being completely honest about your work and financial life. Lenders take all these things into consideration when making a decision about your home loan.

Here are some of the things you can do before applying for a home loan.

1. Conduct your own credit check

Every time you apply for a credit card or loan, the provider will run a credit check and get a copy of your credit file. To better prepare yourself for the home loan application process, conduct your own credit check to see what is on your credit file. If you have too many enquiries on your file, a lender will wonder why, and it may affect your home loan application. Knowing what is on your credit file will help prepare you to answer any questions your lender might have.

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2. Consolidate and organise other debts

Multiple debts will affect your ability to repay a home loan and could make lenders wary of taking a chance on you. If you have more than one credit card, you might want to look at consolidating your debt. Likewise, if you have a high credit limit that you don’t come even close to hitting, perhaps look at lowering your limit. If you have personal loans, consider consolidating them into a single personal loan or into your proposed home loan. All of this can demonstrate to lenders that you can easily repay your home loan, even if your situation changes.

Luke O’Brien, a mortgage broker with Aussie Home Loans, says high credit limits can harm your chances of approval.

“Credit card limits can be higher than an individual needs. Most people don't max out their credit cards, however, the limits are taken into account when looking at servicing,” O’Brien says. “Therefore, before going for a loan, people should reduce their limits and cancel credit cards that they don't use.”

Learn more about debt consolidation

3. Organise your finances

After you have sorted your debts, you’ll need to look at your other finances to make sure you are putting your best foot forward when you apply. Make sure that you have a good savings history and a safety net should something go wrong. Regular deposits into your savings account demonstrate to a lender that you have stability and can maintain payments for a prolonged period.

4. Stay on top of obligations

You should also make sure that your transaction accounts, credit cards and any other accounts you have are in order with no missed payments or overdrawn periods. A lender will typically ask for six months of statements to review. If you are self-employed, make sure all your taxes and other financial obligations are up to date and in order.

O’Brien points out that blemishes such as “previous defaults and declined applications for credit cards along with numerous enquiries around credit cards or personal loans” can all impact your credit score.

5. Organise and prepare your paperwork

You will have to provide paperwork when you apply for a home loan. It is always best to have your documents prepared in advance, so you don’t delay the loan application process.

Most lenders require the following paperwork:

  • Six months of bank statements of every bank account you have
  • Last three to four payslips (for PAYG employees)
  • Last two years of tax returns (self-employed or contractor)
  • Details of other loans, such as the amount, repayments and length. Have statements to illustrate your repayment history
  • Credit card details, limits and repayments for all cards

The documents you’ll need for a home loan

6. Show stability in your life

Lenders like to see that you have stability. If you are considering a major life change, such as switching careers or starting your own business, it may be best to reconsider until you have your home loan. Most lenders won’t look at your application if you are still under probation at work, and most prefer at least 6-12 months of employment at the same company or industry.

If you have just started your own business, you may also face obstacles getting a home loan. While there may be lenders that will accept your application, you may need to wait until you can show some positive cash flow.

Stability isn’t just about your work life. If you are presently renting, lenders will look for stability in your rental history as well. Rental references and documentation showing timely rental payments will help you look favourable to a lender.

7. Stay on top of your expectations

We all want that dream house with the garage and big backyard, but it’s important to be realistic about your expectations. Before applying for your home loan, look at recent sales data for the area you’re interested in and for the type of property you’ll be trying to buy. Also check how much you can actually borrow by using a calculator that will take into account all your expenses and your earnings.

If you have a concrete idea of what you can actually afford and what it will buy you, you will be better prepared for when the lender does their own assessment and offers you your loan. It also means you will be less likely to overborrow and overextend yourself, leading to financial issues in the future.

8. Know your position and situation

Your personal circumstances also affect the types of loans available to you. Are you self-employed or are you classed as a PAYG employee? Are you applying by yourself or as part of a couple or with a guarantor? Do you have bad marks on your credit history? All of these factors can affect the types of home loans that you may be able to get.

9. Save for a rainy day

You’ll also need to set money aside for the other up-front costs associated with a home loan, such as stamp duty, solicitor fees and other costs. It also helps to have a small amount put aside for the costs associated with looking for a property, such as pre-purchase inspections and moving costs.

10. Tell me more

The old adage honesty is the best policy is especially true when applying for a home loan. Tell the lender or your broker about any finance-related mishaps, no matter what they may be or when they happened. Your credit file will show any defaults or declined applications, so your lender will find out anyways. Being up-front allows you to prepare for any questions a lender might have about your credit history.

11. Compare loans before you apply

There are hundreds of home loan options out there, so do some research before you apply for any home loan. Look at your circumstances and then do your research, compare the options that are available to you and then go through the application process.

One important reason to prepare for your home loan application is that all applications and denials will be recorded on your credit file. These will then negatively impact your next application.

Learn how to compare home loans

12. Speak to a professional

With so many options in the market and so many factors determining whether your application is approved, it can sometimes help to speak to a mortgage broker or financial advisor. A financial planner can help you organise your finances before you apply, while a mortgage broker can assist with the actual application process. A mortgage broker will make sure you have all the appropriate paperwork in order before the application is lodged and take you through the application process step-by-step.

Make sure you are putting your best foot forward when applying for a home loan by making sure you have everything in order. Do this and you’re more likely to get that approval straight away.

Compare loans and get the best deal when you're ready to apply

Rates last updated August 18th, 2018
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Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.59%
3.59%
$0
$0 p.a.
80%
Special discounted interest rate
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.64%
3.66%
$0
$0 p.a.
80%
Competitive interest rate and limited fees
A simple mortgage with a competitive interest rate and no application or monthly fees. Borrow up to $2 million from a convenient online lender.
3.64%
3.65%
$0
$0 p.a.
80%
Get approved faster with a speedy online application
Low interest rate and limited fees. Add a 100% offset account for $10 a month.
3.68%
3.82%
$0
$10 monthly ($120 p.a.)
80%
Earn Velocity Frequent Flyer Points with this mortgage to spend on flights and more (subject to eligibility requirements). Redraw facility available on this variable rate home loan. Competitive interest rate.
3.69%
4.11%
$0
$395 p.a.
80%
Save on interest with a 100% offset account
Unlock a range of savings with this competitive package home loan offer. Offset account and redraw facility included.
3.74%
3.74%
$0
$0 p.a.
80%
A basic owner-occupier home loan with a low variable rate that requires a 20% deposit.
3.70%
3.70%
$0
$0 p.a.
70%
You need a 30% deposit to get this mortgage
Get a discount for keeping your LVR at 70% or below with this innovative online lender.
3.54%
3.59%
$0
$0 p.a.
80%
$900 cashback offer on settlement
Get a competitive rate, save on fees and access a 100% offset account plus redraw facility.
3.64%
3.64%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
Earn thousands of Velocity Frequent Flyer Points on your mortgage (subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
3.84%
3.84%
$0
$0 p.a.
80%
Low fee online mortgage
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
3.72%
4.10%
$0
$395 p.a.
80%
100% offset account plus package discounts
New borrowers or refinancers from another lender get a discounted rate with this package loan.
3.64%
3.68%
$0
$0 p.a.
80%
A competitive interest rate for first home buyers that keeps fees low. You will need a 20% deposit and can borrow up to 500000.
3.88%
4.40%
$0
$395 p.a.
90%
Lock in a very competitive 2 year rate and get package discounts on your credit card and offset account.
3.49%
4.57%
$0
$395 p.a.
90%
Save on interest with a 100% offset account
Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.
3.75%
3.75%
$0
$0 p.a.
70%
This sharp rate product requires a 30% deposit
Pay no application or ongoing fees and get a flexible loan with the ability to split up to 6 times.
3.98%
4.41%
$0
$395 p.a.
90%
Take advantage of a low 3 year fixed rate, 40% offset account and no application fee.
3.65%
3.66%
$0
$0 p.a.
80%
Sharp interest rate and low fees
This special rate mortgage has no ongoing fees and offers flexible repayments. Save $595 in establishment fees before 30 September.
3.64%
3.64%
$0
$0 p.a.
70%
A basic variable home loan that offers a competitive interest rate with no application fees and no ongoing fees.
3.70%
4.13%
$0
$395 p.a.
90%
Get this loan with a 10% deposit
Package your loan with an eligible credit card for discounts on rates and fees, and get a 100% offset account.
3.68%
3.70%
$0
$0 p.a.
80%
Get a low rate and save on fees
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments.
3.65%
3.66%
$0
$0 p.a.
90%
Competitive interest rate and low fees. Available with a 10% deposit. Partial offset account attached (offset up to $15,000).
3.64%
3.79%
$0
$10 monthly ($120 p.a.)
70%
100% offset account and a competitive rate
Low rate, low fee loan for owner-occupiers. You will need a 30% deposit to get this mortgage.
3.64%
3.79%
$0
$0 p.a.
80%
Fast online application
Apply online for this fixed rate, low-fee loan with redraw facilities and an optional offset account.
3.72%
3.74%
$0
$0 p.a.
80%
100% offset account and a 10% deposit option
Save on interest by taking advantage of a 100% offset account along with no ongoing fees or application fees.
3.84%
3.82%
$0
$0 p.a.
80%
A fixed rate loan with free redraws, few ongoing fees. Apply online with a fast approval process.
3.85%
3.85%
$0
$0 p.a.
80%
Flexible, low fee mortgage
Pay no application and ongoing fees with Macquarie Bank Basic Home Loan. Split and redraw facilities included.
3.79%
3.79%
$0
$0 p.a.
80%
Minimal fees and a 100% offset account
Access an offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.59%
4.74%
$0
$395 p.a.
90%
Get this package loan with a 10% deposit
Enjoy a competitive rate with no application fee for this package loan.
3.74%
3.74%
$0
$0 p.a.
110%
Borrow up to 110% with a guarantor
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
3.74%
3.79%
$600
$0 p.a.
80%
Low interest rate for new customers
Family guarantee option available. Enjoy flexible repayments and a low minimum loan amount.
3.76%
4.15%
$0
$395 p.a.
90%
Discount special offer with a 100% offset account
A high maximum LVR home loan with redraw facility and additional payments. Get this mortgage with a 10% deposit.
3.72%
4.11%
$0
$349 p.a.
90%
10% deposit option available
Package your loan with other AMP products and save on rates and fees.
3.62%
4.49%
$0
$0 p.a.
80%
Get a competitive rate and avoid ongoing fees. This loan is only available to current and former employees of eligible Queensland government organisations.
3.71%
3.71%
$0
$0 p.a.
70%
A variable rate home loan that has a lot of flexible features. This loan has a 100% offset account.
3.64%
3.69%
$600
$0 p.a.
80%
Low fees and low interest rate
A competitive variable rate for borrowers with a 20% deposit or more. Guarantor option available.
3.59%
4.14%
$395
$0 p.a.
80%
Competitive interest rate
A one year fixed rate offer with no ongoing bank fees.
3.97%
3.99%
$0
$0 p.a.
80%
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
4.04%
4.07%
$0
$0 p.a.
90%
Get this loan with a 10% deposit
For a limited time, pay no application or settlement fees. You can also take advantage of a free redraw facility.
3.99%
4.44%
$395
$0 p.a.
80%
Pay no ongoing fees on this investment loan fixed for 3 years.
3.89%
3.94%
$0
$0 p.a.
90%
Available with a 10% deposit
Borrow up to 90% of the value of the property you're buying, and pay no application fee.
3.70%
3.90%
$0
$0 p.a.
70%
Requires a 30% deposit
Enjoy all the benefits of the Basic Home Loan and take advantage of an offset account.
3.75%
4.00%
$0
$248 p.a.
70%
100% offset account included
Borrowers with a 30% deposit can get this competitive rate.
3.99%
5.17%
$600
$0 p.a.
90%
Available with a 10% deposit
Competitive rates for fixed for 3 years with redraw facility.
3.59%
3.99%
$600
$395 p.a.
95%
Get interest rate discounts and waived fees on this package loan with a 100% offset account.
3.99%
3.99%
$0
$0 p.a.
70%
Save on fees with this investor mortgage
Investors with a 30% deposit can get this low rate loan to fund their property portfolio.
3.91%
3.92%
$0
$0 p.a.
80%
Add an offset account for $10 a month
Investors can go from application to approval in as little as 20 minutes with this innovative online lender.
3.81%
3.81%
$0
$0 p.a.
80%
A home loan with a competitive rate and plenty of handy features. This product comes with a 100% offset account.
3.74%
4.01%
$395
$0 p.a.
80%
Lock in a low rate for 3 years
A competitive fixed interest rate product with no ongoing bank fees.
4.31%
3.95%
$0
$0 p.a.
80%
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender.
4.29%
4.31%
$0
$0 p.a.
80%
Flexible, low fee mortgage
Investors will pay no application or ongoing fees for this interest-only loan.
3.74%
3.74%
$0
$0 p.a.
80%
Low rate for people borrowing under $200,000
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule.
3.89%
4.24%
$0
$0 p.a.
80%
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
3.89%
4.94%
$595
$0 p.a.
90%
10% deposit option available
Borrow up to 90% of the value of the property you're buying and pay no application or ongoing fees.
4.18%
4.18%
$0
$0 p.a.
80%
Competitive investment mortgage
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
3.99%
4.86%
$0
$0 p.a.
80%
Fix your rate for 2 years
Access a fee-free 100% offset account and pay no application or ongoing fees.
4.29%
4.26%
$0
$0 p.a.
95%
A competitive 3-year fixed rate loan with a high max insured LVR.
4.14%
4.81%
$0
$0 p.a.
80%
No ongoing fees
Pay no application fees and access a fee-free redraw facility with this fixed rate loan.
3.99%
3.99%
$0
$0 p.a.
80%
Special discounted interest rate
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
4.14%
3.96%
$0
$0 p.a.
80%
Low fee investor mortgage
Investors can go from application to full approval in as little as 20 minutes with this innovative online lender.
4.14%
4.17%
$0
$0 p.a.
80%
Competitive rate for investors
Investors can enjoy flexible repayment options and pay no application or ongoing fees.
3.84%
3.91%
$0
$0 p.a.
80%
Flexible low fee mortgage
Enjoy a fast application process and flexible repayment options with this fixed rate mortgage for investing.
4.24%
4.27%
$0
$0 p.a.
95%
Low deposit loan for investors
Buy a home with just a 5% deposit and get flexible repayment options and a redraw facility.
3.80%
4.95%
$300
$35 monthly ($420 p.a.)
90%
Competitive 1 year fixed rate mortgage.
3.94%
3.92%
$0
$0 p.a.
80%
Lock in your interest rate for 2 years and enjoy flexibility, an optional offset account and a fast online application process.

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UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000

Take advantage of a low-fee mortgage with a special interest rate of just 3.59% p.a. and a 3.59% p.a. comparison rate.

loans.com.au Essentials - Variable (Owner Occupier, P&I)

A competitive interest rate home loan with interest only options. Interest rate 3.64% p.a.
comp rate of 3.66% p.a.

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)

Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.

Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150k+ Owner Occupier, P&I) Discount 1

New borrowers or refinancers from another lender get a discounted rate with this package loan.

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