Applying for a home loan in Australia can feel like a big deal, and to be honest, it is. There are lots of steps involved; lenders will look closely at every part of your financial life. Small slip-ups can cause delays, or even derail your application. But here’s the thing; it doesn’t have to be scary.
If you’re a first home buyer or an investor, knowing what to watch out for puts you in a much stronger position. Avoiding delays could be the difference between holding the keys to your new place or losing out.
Key Takeaways
- Pre-approval sets you up with confidence and avoids nasty surprises.
- Lenders want documents that are accurate and complete; half-done applications cause problems.
- Keeping your job, savings, and spending steady makes you a safer bet.
- Your credit history matters; even card limits can shape what you can borrow.
- Picking the right lender and answering quickly saves a lot of time.
Mistake 1: Not Obtaining Pre-Approval Before House Hunting
Jumping into house hunting without pre-approval is like going shopping without knowing what’s in your wallet. You risk falling in love with a property that’s out of reach, or worse, making an offer you can’t back up. If you can’t get finance in time, you could lose your deposit; in an auction setting, that risk only grows.
How to Avoid It
Get your pre-approval sorted before you start hitting open homes. It gives you a clear budget and the confidence to make offers when the right place comes up. In Australia, most pre-approvals last 3 to 6 months; plenty of time to house hunt. Think of it as a dress rehearsal for your loan. It also gives lenders a chance to flag any problems early, so you’re not blindsided later.
Mistake 2: Providing Incomplete or Incorrect Documentation
Lenders need bank statements, pay slips, ID, and tax returns. Many applications stall because documents are missing or details are wrong. Errors like incorrect dates of birth or mismatched income figures raise red flags.
How to Avoid It
Think of the checklist from your lender or broker as your cheat sheet; it tells you exactly what they need. Work through it carefully and make sure you’ve ticked every box before you send anything back. Keep your ID, tax returns, and bank records handy and up to date, so you’re not scrambling at the last minute. And when the bank or broker comes back with a question, don’t sit on it; the quicker you respond, the quicker your loan moves forward.
Mistake 3: Inaccurate or Misleading Financial Information
Some borrowers overstate income, understate expenses, or hide debts. Lenders cross-check your application with credit reports and account statements. Any inconsistency causes delays. Attempting to mislead can be flagged as fraud.
How to Avoid It
Be honest about your financial position. List every loan, credit card, and recurring expense. Provide proof of income with pay slips or tax assessments. Transparency builds trust and helps your application move faster.
Mistake 4: Ignoring Your Credit History and Having Multiple Loan Applications
A poor credit history or unknown defaults can slow or block approval. Even small unpaid bills can appear on your file. Multiple recent loan applications also signal risk to lenders.
Multiple Applications and Their Impact
Every application leaves a mark on your credit report. Too many marks suggest you may have been rejected by other lenders. This can discourage a new lender from approving your loan.
How to Avoid It
Get a free credit report before applying for a home loan. Resolve any issues you find and avoid unnecessary credit applications. Work with a broker to compare lenders without applying multiple times.
Mistake 5: Changing Jobs or Taking on New Debt During the Process
Lenders prefer stable employment. Changing jobs or starting during probation raises doubts about your income reliability. This can cause lenders to delay or reduce approval.
New Debts and Serviceability
New loans, car finance, or large purchases change your financial position. They reduce your borrowing power and force the lender to reassess your application.
How to Avoid It
Stay in your current job until after settlement if possible. Delay major purchases or loans until your mortgage is approved. If changes are unavoidable, tell your broker immediately.
Mistake 6: Missing Payments or Damaging Your Credit During Application
Lenders check your repayment behaviour through recent bank and credit statements. Missed bills or loan repayments reduce your chances of approval.
Consequences of Missed Payments
Even one late payment can delay approval. Multiple missed payments may cause outright rejection.
How to Avoid It
Set up direct debits for all bills and loans to avoid missing payments. Stay disciplined in the months before and during your application. If you do miss a payment, fix it immediately and be ready to explain the situation.
Mistake 7: Keeping High Credit Card Limits and New Credit Accounts
Lenders assess your credit limits as potential debt, even if you owe nothing. High limits reduce your borrowing power. A $10,000 card limit could reduce your loan approval amount by thousands.
New Accounts During Assessment
Opening new cards or credit accounts during assessment signals risk. Lenders may reassess your serviceability and delay approval.
How to Avoid It
Reduce your card limits before applying for a loan. Close unused accounts. Avoid new loans or cards until your mortgage is finalised.
Mistake 8: Unstable Savings and Unexplained Bank Transactions
Lenders want to see consistent saving behaviour. Sudden large deposits or withdrawals create doubt. For low-deposit loans, genuine savings are required for Lenders Mortgage Insurance.
Red Flags for Lenders
Unexplained lump sums can look like borrowed money. Frequent withdrawals from your deposit account suggest poor financial discipline.
How to Avoid It
Keep your deposit funds stable for at least three months before applying. Document any lump sum deposits, such as gifts, with letters or receipts. Avoid large withdrawals or transfers during the application.
Mistake 9: Underestimating Additional Costs and Lacking Sufficient Funds
Many buyers focus only on the deposit. They forget stamp duty, legal fees, inspections, moving costs, and mortgage insurance. If you cannot cover these, the lender may not approve the loan.
Government Grants and Schemes
First home buyers may rely on the First Home Owner Grant or guarantee schemes. If you assume you are eligible without checking, you may fall short on funds.
How to Avoid It
Research all upfront costs in your state. Use stamp duty calculators and confirm conveyancing and inspection fees. Keep a financial buffer above your deposit. Confirm eligibility for any government grants or schemes before counting on them.
Mistake 10: Choosing the Wrong Lender or Loan Product
Some banks or lenders have long approval times due to high demand. Choosing the cheapest rate without checking turnaround time can cause you to miss settlement deadlines.
Mismatched Policies and Borrower Needs
Different lenders have different rules. Some do not accept small apartments, rural properties, or certain income types. If you apply with the wrong lender, your application may stall.
How to Avoid It
Research lenders or use a mortgage broker to match your situation with the right bank. Ask about current approval times. Choose a lender that balances rate, policy, and speed.
Mistake 11: Poor Timing and Communication Delays the Process
Signing a contract without applying for finance quickly can leave little time. Short settlements of 21 days may not suit bank processing times.
Communication Breakdowns
Delays often occur because borrowers take too long to respond to requests. Lenders queue applications, so even a few days’ delay can set you back.
How to Avoid It
Apply for finance immediately after signing a contract. Negotiate settlement periods that give you enough time. Check your emails and phone regularly during the process and reply quickly to any requests.
Conclusion
Securing a home loan in Australia is detailed, but it does not have to be stressful. By preparing early, staying honest, and keeping your finances stable, you can avoid common mistakes. Choose your lender carefully, understand all costs, and stay engaged during the process.
Getting a home loan can feel like a huge milestone, and it is. But it doesn’t have to feel overwhelming. The trick is to get ahead of the process. Lenders aren’t mysterious creatures; they just want to see steady finances and tidy paperwork. If you’ve got that sorted, most of the usual roadblocks vanish. What really matters is finding a lender that makes sense for you, being upfront about the real costs, and staying engaged right through to settlement.
Think of it less as jumping through hoops and more as taking control of your financing. A respectable no deposit home loan lender like Empower Money can help you get your first home loan!
FAQs
What is the average time for home loan approval in Australia?
It really depends on the lender; some can turn it around in just a few days, while others might take a few weeks. The speed mostly comes down to how complete your paperwork is when you apply.
Do I need pre-approval to bid at auction?
Yes; going in without pre-approval is risky. If you win the auction but can’t get finance in time, you could lose your deposit and the property.
How long does pre-approval last?
Most lenders will hold a pre-approval for around 3 to 6 months; after that, you’ll need to reapply if you haven’t found the right place yet.
Can I change jobs after getting pre-approval?
It’s best not to; lenders want to see stability. If you change jobs before settlement, they may need to reassess your income, which could hold things up.
Will reducing my credit card limits help?
Yes; lenders look at your card limits as if you might use the full amount. Cutting back those limits can boost your borrowing power and make your application stronger.
Sources
- James Matheson – Rateseeker (2020) – “12 common mistakes buyers make when applying for a home loan (and how to avoid them)”
- CHOICE (2020) – “How to deal with home loan delays during your property settlement”
- Gavin Harrigan – Quantum Finance Australia (2023) – “15 Common Home Loan Application Mistakes to Avoid”
- Redrock Group – “Mortgage application mistakes – Don’t Make These!”
- Kate McIntyre – realestate.com.au (2024) – “Biggest mistakes first-time property investors make”
- Australian Financial Complaints Authority (AFCA) advice via CHOICE – Evelyn Halls interview
- Rateseeker (2020)
- CHOICE (2020) – UBank case study on slow approval times
