Securing a home loan is often one of the biggest financial steps you’ll take in your life, and it’s important to be fully prepared. While the process might seem overwhelming, understanding what lenders are looking for and how to improve your application may potentially enhance your chances of success. Whether you’re a first-home buyer or looking to refinance, knowing the key factors that influence approval may put you in a stronger position to secure the loan you need. In this blog, you will learn proven strategies to improve your home loan approval chances. Discover what lenders look for and position yourself for success in the application process.
1. The Current Lending Landscape
In today’s economic climate, home loan approval is becoming more stringent, with lenders paying closer attention to borrowers’ financial health. Factors like high inflation, rising interest rates, and cost of living pressures mean that lenders are cautious about who they approve for home loans. However, by understanding these market conditions and preparing accordingly, you may be able to enhance your loan application’s appeal.
2. Why Securing a Home Loan Requires Preparation and Planning
Home loan approval isn’t just about income or savings—it’s about presenting yourself as a low-risk borrower. The more prepared you are, the more streamlined the process can be. Having a clear understanding of your credit score, knowing your borrowing limits, and ensuring your financial documents are organised will all contribute to a stronger application. Planning ahead gives you time to fix any potential issues, such as improving your credit score or saving a larger deposit, making you more appealing to lenders.
3. The Importance of Understanding What Lenders Are Looking For
Lenders use a variety of criteria to assess loan applications, including your creditworthiness, income stability, debt levels, and savings patterns. Understanding these key factors gives you the opportunity of tailoring your financial situation to match what lenders want to see. From demonstrating responsible spending habits to ensuring your paperwork is in order, being proactive in addressing these elements can potentially improve your chances of getting that all-important approval.

15 Things To Do That May Help You Improve Your Home Loan Approval Chances
1. Understand Your Credit Score
Your credit score is one of the first things lenders look at to determine whether you’re a responsible borrower. A higher credit score typically means you’re less risky, making it easier to get loan approval and qualify for better interest rates. To improve your score:
- Check your credit report for errors and fix any inaccuracies.
- Pay off overdue debts or bills.
- Make all payments on time, especially on credit cards and loans.
- Avoid applying for multiple credit products within a short period.
2. Reduce Outstanding Debts
Lenders assess your debt-to-income ratio, which is the amount of debt you have compared to your income. If you’re carrying high levels of credit card debt, personal loans, or car loans, lenders may see you as a higher risk. Reducing your outstanding debt not only improves your ratio but may also free up more of your income for mortgage repayments.
- Focus on paying down high-interest debt first.
- Consider consolidating debts into a lower-interest loan.
- Avoid accruing new debt in the months leading up to your application.
3. Save for a Larger Deposit
A larger deposit shows lenders that you’re financially disciplined and reduces their risk. Additionally, a bigger deposit reduces the amount you need to borrow, which may lead to more competitive interest rates and lower monthly repayments. Lenders prefer borrowers with at least a 20% deposit to avoid paying lenders mortgage insurance (LMI).
- Set up automatic savings from your paycheck to a separate account.
- Cut non-essential expenses and funnel savings towards your deposit.
- Consider additional sources of income to boost your savings rate.
4. Maintain Stable Employment
Lenders prefer borrowers who have stable, long-term employment as it shows consistent income and financial security.
- If you’re self-employed, ensure you can show consistent income over at least two years.
- Avoid switching jobs or industries before applying, as this may raise red flags for lenders.
5. Avoid Job Changes Before Applying
Lenders view frequent job changes or short employment periods as a sign of instability, which may make you appear riskier. Staying in your job for a longer period before applying for a loan demonstrates steady income and reliability.
- If you anticipate a job change, it’s better to delay applying for a home loan until you’ve been in the new role for at least six months.
- Contractors and freelancers may need to show a longer history of income consistency.
6. Prepare Your Financial Documents
Having your financial paperwork organised and ready to go can potentially help expedite the loan approval process. Lenders will require:
- Pay slips (2 most recent).
- Recent tax returns & Notice of Assessments (NOA’s).
- Bank statements showing your savings and any debts.
- A breakdown of your assets and liabilities. Being organised can make the process more streamlined and shows the lender that you’re serious about your application.

7. Avoid Making Large Purchases
Big-ticket items, such as new cars or expensive holidays, can reduce your savings and increase your debt levels, which in turn decreases your borrowing capacity. Lenders will scrutinise your bank statements and credit activity in the months leading up to your application.
- Hold off on purchasing any large items until after your home loan is approved.
- If a large purchase is necessary, ensure it doesn’t noticeably affect your savings or raise your debt-to-income ratio.
8. Minimise Credit Applications
Each time you apply for credit (whether it’s for a credit card, car loan, or store finance), it leaves a mark on your credit report. Multiple applications in a short period may lower your credit score.
- Avoid applying for new credit products 6-12 months before you apply for a home loan.
- Close any unused credit accounts to reduce your credit exposure, but do this strategically as closing accounts can also impact your credit score in the short term.
9. Know Your Borrowing Power
Before you apply for a loan, it’s crucial to understand how to apply for a mortgage loan and how much you can realistically borrow. This ensures you target homes within your price range and don’t waste time pursuing properties that are beyond your borrowing capacity.
- Use online calculators to get an estimate of your borrowing power Click here to access calculators.
- Speak to a mortgage broker to get a clearer picture based on your specific financial situation.
- Knowing your limits also helps prevent overextending yourself financially.
10. Get Pre-Approval
Pre-approval gives you a clear idea of how much a lender is willing to lend, which helps you shop with more confidence and shows real estate agents and sellers that you’re a serious buyer.
- Pre-approval can help speed up the final approval process once you find a home.
- It provides a solid foundation for negotiating on price, as you already know how much you can borrow.
11. Seek Professional Advice
Navigating the home loan market can be complex, especially with constantly changing lending rules and rates. Working with a mortgage broker can help you understand your options, find the loan that meets your financial needs & objectives, and help strengthen your application.
- Brokers can access a wide range of lenders and tailor solutions to your financial situation.
- They may also be able to help improve your application by identifying weak points and offering advice on how to present a stronger case to lenders.
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12. Opt for a Lower Loan-to-Value Ratio (LVR)
The loan-to-value ratio (LVR) is the amount you’re borrowing compared to the property’s value. A lower LVR means you have more equity in the property, which reduces the lender’s risk.
- Aim for an LVR below 80% to avoid paying Lenders Mortgage Insurance (LMI).
- If you can’t achieve this, consider properties with lower prices to bring down your LVR.
13. Maintain Consistent Savings Habits
Lenders like to see that you’re financially responsible, and consistent saving patterns demonstrate your ability to manage money over time. Regular deposits into a savings account can be considered “genuine savings,” which some lenders require as proof of financial stability.
- Set up a savings plan and stick to it for at least 3-6 months before applying.
- Avoid dipping into your savings for non-essential spending.
14. Keep Personal Expenses in Check
Lenders will closely scrutinise your monthly expenses to ensure you can comfortably afford loan repayments. High discretionary spending on entertainment, dining out, or luxury items may raise concerns.
- Track your spending and create a budget to reduce unnecessary expenses.
- Prioritise essential spending and ensure you have a buffer for loan repayments.
- Some lenders will ask for bank statements to review your spending habits over the past few months, so aim to present a responsible financial picture.
15. Consider a Guarantor
If you’re struggling to meet the lender’s requirements for approval, having a guarantor may strengthen your application. A guarantor (usually a parent or close relative) agrees to cover your loan repayments if you’re unable to, reducing the risk for the lender.
- Guarantors can also help you avoid Lenders Mortgage Insurance (LMI) if they use their own property as security.
- Make sure the guarantor understands their obligations, as they will be financially responsible if you default on the loan.
Securing a home loan may feel daunting, but by following these 15 tips, you may be able to improve your chances of getting approved. From understanding your credit score to saving for a larger deposit and preparing your financial documents, each step helps position you as a responsible borrower in the eyes of lenders. While nothing is guaranteed, being proactive, informed, and prepared can make all the difference. If you’re looking for personalised guidance on your journey to home ownership, don’t hesitate to reach out to Brava Finance for lending advice tailored to your unique situation.

Disclaimer:
This page provides general information only and has been prepared without taking into account your objectives, financial situation, or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax, or financial advice and you should always seek professional advice in relation to your individual circumstances.
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