What does a lender assess your home loan application on?

Finance Jul 19, 2018

6 min read

Applying for a home loan can often feel like you’re committing to an avalanche of paperwork. But when you decide to make that leap to home ownership, what does the lender actually assess your home loan application on?



A big part of your ability to take out a home loan, is going to be your ability to service or repay that debt. The lender will want to see that you are employed or self-employed, earning a consistent income and will want to see how long you have been in your current work situation.

Even if you have a pre-approval (and even for a loan settled in the previous 6-12 months), your employment should remain the same. Any foreseeable change in your financial circumstance can affect your ability to acquire the loan.


Existing debt

The lender will need to know what existing debt you have including personal loans, credit cards, other home loans, HECS or student loans, lines of credit and now even things like AfterPay and ZipPay.

They take your level of debt and your repayment history on these debts into consideration when assessing your home loan application. Existing home loan debt is assessed at a higher rate (usually around 7.5%) and often credit cards are also looked at more carefully, many lenders will assume 36% limit even if you don’t use the card.


Spending habits

Increasingly, we are seeing lenders asking for precise accounting of your living expenses and discretionary spending habits. In the past it was assumed that we all had the same or similar living expenses irrespective of our income. This assumption is being challenged as consumer spending habits have changed. Many lenders will now ask for at least 3 months of bank statements to verify your spending.



You will need to have a deposit saved (unless you have a Guarantor). For most lenders, if you are borrowing 90% or more, you will need to show genuine savings, that is, that you have contributed to your savings account consistently over time. They usually need to see 5% saved over a minimum of 3 months.


Credit history

All lenders will perform an internal credit check on you when assessing your home loan application. Your credit record has information like any loan enquiries over the last five years, details of any debts you have applied for, any credit infringements, what type of debt it is, along with information on bankruptcy, insolvency and public proceedings.

There has been talk and planning by the government recently around Open Banking. In the very near future, this means information like your monthly repayment history including any missed or late payments, what debt you currently have and your credit limit.


Being honest and upfront

There’s nothing better you can do in your home loan application with the lender than be open, honest and upfront. If you intentionally leave something out of your home loan application or attempt to defraud the lenders, then you’re opening yourself for a world of trouble.

It’s also not worthwhile trying to hide credit cards or debt you have as this can negatively impact not only this application but future applications too when the lenders discover the deception.


Common documents needed for your home loan application:

  • 100 points of ID
  • Most recent 2 payslips
  • Your last group certificate
  • Recent statements for all liabilities (credit card, home loan, personal loan)
  • Bank statements to verify living expenses and salary credit
  • Most recent savings statements to verify contribution funds

Applying for a home loan application doesn’t have to be daunting, as long as you have made some savvy financial decisions and are on top of your situation it’ll be a breeze.

Are you thinking about buying property soon and organising finance?