Has your loan been declined after pre-approval? It can be a disappointing and frustrating experience. But don’t despair; it is not the end of the world! In this article, you’ll learn why home loan applications get declined.
The best part?
We will show you 29 techniques for turning around that decline to get unconditional approval, and consulting a mortgage broker in Brisbane is one of the most crucial steps. These strategies are working right now (in 2024).
In short, if you want to get your Home Loan approved, you’ll love this guide.
Let’s get started.
1. Switching Jobs
Even though you might be earning the same money (or MORE), some banks will decline your loan after your pre-approval if you have recently switched jobs.
Case Study: Newly employed Casual Worker with less than 1 month on the job
For example, Laura worked at Electronic Boutique full-time for the past 2 years, where she worked when her loan was pre-approved.
Since then, Laura moved to JB Hi-Fi, getting paid more on a casual basis. Her income has increased since she was casual and getting extra pay on Sundays and late nights during the week.
Her bank declined her loan after the original pre-approval as she switched jobs and had been casually employed for under 12 months (even though she was getting paid more!!).
Our Mortgage Brokers were able to get Laura’s loan approved with another bank, which took into consideration her 2 years’ experience in the industry and did not have a minimum work period for casual employment.
Each bank has its own credit policy on switching jobs. If you have changed jobs after your pre-approval, it’s okay. Chat with the Home Loan Experts at Hunter Galloway to see if your bank will accept that and what your loan options are.
2. A Contractor For Less Than 12 Months
Contractors usually fall into two categories:
- PAYG Contractors or
- Self-Employed Contractors.
PAYG Contractors are employed on a fixed-term, short-term, or long-term contract, ordinarily with an end date but in some cases with an automatic extension period, and includes sick leave and holiday pay.
Self Employed Contractors ordinarily are registered as sole traders, have an ABN and cover their own expenses like wages, superannuation and insurances.
In either scenario, some banks do not like giving loans to Contractors with Less than 12 months in their current role.
Case Study: Contractor with less than 6 months on his contract term
Kate & Thomas are a couple wanting to apply for a loan. Thomas has been working for the same employer for the past 3 years, and 4 months ago, he switched to being a contractor as it offered a higher rate of pay.
Thomas’ contract only has 2 months left to run, as it was initially a 6-month contract. He is also considered a self-employed contractor because he invoices his employer each month and his existing bank declined his home loan.
Our Mortgage Brokers were able to get Tom’s loan approved with a major bank. We used Tom’s new contract income rate (which was 35% higher than in previous years) and helped him borrow a higher amount than if he was relying on his old income.
Each bank has its own credit policy on Contractor Income. If you get paid by Contract Income, it’s okay. Chat with the Home Loan Experts at Hunter Galloway to see if your bank will accept that and what your loan options are.
Read More: How to get a Home Loan on Contractor Income [updated 2024]
3. Mortgage Insurance
If you have less than 20% deposit, you will be required to pay lenders mortgage insurance.
Your bank may decline your loan after pre-approval because you don’t meet the criteria for the mortgage insurance company they are using.
Case study: Loan declined because of mortgage insurance
In early October, I received a call from Shelley, and she was looking for assistance to get her home loan approved. Six weeks earlier, she had arranged a pre-approval with her bank. It didn’t take long for her to find a home. With a contract of sale in hand, she went back to the bank to finalise the process and get her loan approved. The bank did everything they usually do — first, completing evaluation which went off without a hitch.
From there, she was told that her application had one stop because she only had an 8% deposit. The bank’s mortgage insurer had to complete their final assessment before the bank could issue the formal approval letter. While she met all the bank’s criteria, the bank’s mortgage insurance declined the application as it didn’t meet their lending criteria. Kelly’s story does have a happy ending. Having reached out to us, we helped her and were successful in getting her home loan approved.
4. Declined After Assessment Rate Change
When you apply for a pre-approval, the banks don’t use today’s interest rate to determine your serviceability or how much you can borrow. They use an assessment rate.
The assessment rate is normally 2-3% higher than the current interest rates you are paying today to ensure there is enough buffer for when interest rates rise down the track and ultimately ensures you will be able to make these payments in the event of future rate rises.
Think of it as a stress test for your overall financial situation.
Unfortunately, the banks don’t make their assessment rates available to the general public, so it’s hard to know if you are going to pass or fail their serviceability test until you either speak with a mortgage broker or when you are doing your pre-approval application with the bank.
This is where it can go wrong; you may have done a pre-approval when the assessment rate was lower and your borrowing capacity was higher, but it has since changed, and this can make all the difference.
For example, a single borrower with an annual income of $70,000 (and no debt) can borrow around $565,000 with an assessment rate of 5.50%. However, when assessed at 7.00%, they can only borrow $470,000, meaning a reduction in borrowing power of over $95,000!
For some home buyers with a pre-approval, this difference in the assessment rate could mean that your pre-approval gets declined without your income, or situation changing!
If you are concerned about being declined after the bank’s assessment rate changes, it might be worth clarifying with your mortgage broker if your bank will re-assess the assessment rate when you find a home or if they will honour it at the time of pre-approval. This can make a massive difference in a rising interest rate environment.
5. Being Self Employed
Some banks make getting a Home Loan when you are self-employed really tough…
However, not all banks dislike people who are their own bosses.
In fact:
We find home loan options for over 89% of our self-employed clients through the major banks.
There are three common reasons banks decline self-employed home loans:
- Over 20% increase (or decrease) in profit between financial years.
- Making payment plans with the taxation office. If you’re self-employed, having a payment plan with the tax office is a little bit of a No-No. The banks not only look at how much you’re earning but also your ability to manage your financial affairs, so try to avoid tax payment plans if possible.
- The current tax year’s financials and returns haven’t been prepared yet.
But did you know not all the banks have the same cutoffs for when your FY23 financials are required?
Case Study: Self Employed Business Owner who hasn't completed most recent years tax returns
Sally and Erica have been running their wedding photography business for over 18 months. It has been extremely profitable, and they want to get an investment home loan together to grow their portfolio.
The business has experienced really strong growth of over 142% in profit, with a small profit in the first (partial) financial year and a really good profit in their second financial year.
Their bank has rejected their home loan as they have been self-employed for under 2 years and said they wouldn’t accept the most recent year’s income. When they applied for a loan, the bank would use an average of both years’ profit, which calculates to a very small amount.
Our Mortgage Brokers were able to get Sally and Erica a loan approved with a major bank. We were able to provide the FY17 Tax Returns and Financials working off the most recent year’s profit.
Each bank has its own credit policy on Self Employed Income. If you are a business owner, you can qualify for a loan. Chat with the Home Loan Experts at Hunter Galloway to see if your bank will accept that and what your loan options are.
| Bank 1 | Bank 2 | Bank 3 |
Tax Returns Required | FY23 + FY24 Tax Returns and Financials | FY23 Tax Returns Only | FY23 + FY24 + Management accounts for FY19, tax returns and financials |
How to calculate net profit | Average of FY23 + FY24 | Most recent years net profit | Lower of FY23 o FY24 |
Read More: Self-Employed Finance Options for Business Owners
6. Type Of Occupation
The banks view different industries and, in particular, different occupations with varying degrees of risk.
For example, an underground coal mine worker is considered a bit riskier than a high school teacher.
During COVID-19, we found (some) banks increased scrutiny around employers and the type of employment contract.
The same is true with Farmers, Sex Workers or Seasonal Workers whose income can be very high one year and low the next.
Again, different banks have different appetites for different occupations. Chat with the Home Loan Experts at Hunter Galloway to see which banks will accept your occupation and what your loan options are.
7. You Went On Holidays
When you are employed full time, you are given 4 weeks paid holidays and sick leave.
But, if you are a casual employee or a contractor you are not given holiday pay.
For example, if you are a Relief Teacher, you might be paid more during the year. However, if you applied for a loan during the December Christmas holidays, your payslips might not show a whole lot until you go back in January.
The bank will need your most recent payslip when going for your final (unconditional) approval, and if that payslip has nil income or a lower amount, they will annualise this figure to work out your pay. With this figure being lower, your borrowing capacity is also reduced, which could cause your home loan to be declined.
We have access to banks which will look at your annual earnings and take into consideration your total income earnings for the past year, so arrange a free assessment with one of our Home Loan Experts to see what you can borrow.
Each bank has its own credit policy for Casual Income earners. If you are a Relief Teacher or Casual Worker, you may qualify for a loan using your tax returns or PAYG group certificates.
8. Overtime, Shift Loading, Bonuses Or Salary Sacrifice
Some banks will only consider 50-80% of your overtime and bonus income and will not add back any salary sacrifices you make, like additional payments to superannuation.
An example of this is for Nurses.
Overtime and shift loading make up a large part of the income paid to nurses due to the nature of the job, and not being able to use this income can really reduce your overall borrowing capacity.
If you worked nights one month and days the next, your income could be way lower than when your loan was originally pre-approved, causing the bank to decline your loan due to the decrease in pay.
Not all banks get that as a Nurse, you spend large amounts of time on shift work, and earning shift penalties is an essential part of your income.
At Hunter Galloway, we work with several banks and lenders that understand that overtime is a core function of your remuneration as a Nurse (or other paid overtime roles) and can use 100% of your overtime income.
To use this income, we will need:
- Your 2 most recent payslips
- Your most recent year’s PAYG group certificate
- In some cases, we may need a letter from your employer confirming you have been receiving regular overtime for the past 1-2 years.
Type of Income | Bank A | Bank B | Bank C |
Overtime | 100% can be used | Unacceptable | 80% can be used |
Bonuses | 100% can be used if > 12 months history | Under 2 years unacceptable | 80% can be used |
Salary Sacrifice | Can be added back to income if discretionary | Unacceptable | Can be added back to income if discretionary |
9. Uber Income Or Second Job Not Being Accepted
Working as an Uber Driver (or Ola, GoCatch, Lyft or Shebah) and having a second job can help increase your borrowing capacity.
…But not all banks will accept this income!
Some banks will only accept 50% of the income you make as an Uber Driver or in your second job.
So, how can you get this income accepted?
The banks will want to see at least 12 months of proof of Uber income or your second job to show that it has been consistent over this period.
Type of Income | Bank A | Bank B | Bank C |
Uber Income, Or Second Job Income | Most Recent Years Tax Return | Lowest figure from your last 2 years tax returns | Average figure from your last 2 years tax returns |
To use this income, we will need the following:
- Your Most Recent Year’s Tax Return
- Your Most Recent Years ATO Notice of Assessment
- Business Activity Statements (BAS), 6-12 months Business Account Statements
10. Taking On An Extra Credit Card
When taking out your pre-approval, the bank would have done a serviceability calculation to determine your maximum borrowing amount.
In other words, at the time you got your pre-approval, the bank calculated the maximum amount they would lend you based on your income minus your credit cards at that time.
If you are applying for this amount and have gotten an extra credit card or a car loan, the bank may decline your pre-approval because you do not fit inside their calculators.
(Those 100,000 QANTAS frequent flyer points aren’t looking so hot now, are they?)
This is completely fixable—different lenders have different borrowing capacity calculations. As you can see below, the same borrower on the same income can borrow an extra $40,000 from the highest to the lowest bank.
Other ways to increase your borrowing capacity:
- Reduce unused limits on your credit cards
- Close AfterPay and other Personal Loans
- Look at other banks that have different capacity criteria
Read More: How do I increase my borrowing capacity?
11. Too Many Credit Enquiries
If it wasn’t enough being too young, too old, or looking for a unique property, the banks also regularly decline home loan applications because you may have had too many credit enquiries in the past 12 months.
In other words, if you have had more than 2 or 3 enquiries in the last 6 months, the banks could give you a bad credit score and reject your home loan.
The thing that really sucks is that you don’t get credit enquiries from just applying for credit cards!
Any time you get a new phone plan, change electricity providers or get AfterPay, a credit check is done!!
Fortunately, there are banks and lenders that will consider your application provided there are fair reasons for the credit enquiries.
Ways to manage your credit file:
- Get a free copy of your credit file from Veda, or we can get one for you.
- Sign up for Credit File Alerts using Equifax
- Look at banks that do not credit-score home loan applications
Our team regularly deals with these non-credit scoring lenders and can help you find a deal that works for you and find out if you qualify with a free assessment.
Read More: What positive credit reporting means to home loans
12. Missing A Phone Bill
A bad credit history in the eyes of the banks involves small defaults, bankruptcies and judgements on your credit file. But did you know that missing a phone bill can also give you a bad credit history?
Defaults on your credit file as small as $100 can cause the bank to reject or decline your home loan.
As an example, we’ve recently had a first home buyer who had a small phone bill that was sent to their old address. They moved, and it was never paid. This first homeowner never received the bill and wasn’t notified of it being overdue because all the mail was going to the wrong address.
As a result, the phone company put a default on their credit file for the amount owing and the first homeowner didn’t become aware of this until they tried to apply for finance through their bank and got knocked back! Fortunately, they came to us, and we were able to help them navigate around it and find a lender that would let them buy their dream home.
Phone Bill Default (telco default) | Bank A | Bank B | Bank C |
Under $100 | No | Yes, if paid. | Yes, if paid. |
Under $500 | No | Yes, if paid. | Yes, if paid. |
Over $1,000 | No | No | Yes, if paid. |
Ways to navigate a bad credit file
- Get a free copy of your credit file from Veda, or we can get one for you.
- Sign up for Credit File Alerts using Equifax
- Look at banks that do not use credit scores to analyse home loan applications
Having a black mark on your credit file doesn’t necessarily mean it’s the end of the world, and your loan may not get declined, but we can help you apply with the right lender for your situation to make sure you get your loan approved. Speak with our Bad Credit Experts and call us on 1300 088 065.
Read More: What happens if I have a bad credit history?
13. Late On A Rent Payment
While you wouldn’t think being late on your rent should affect your home loan application, some lenders will ask for a 12-month rental history (or a tenancy ledger), which can detail your rental payments.
If you have missed a rental payment or were late for more than 1 rental payment over the past 12 months, your bank might decline your pre-approval
Case Study: One Late Payment And One Declined Home Loan
Sally and Tom have been renting a unit in Brisbane for the past 3 years. They have been making their weekly rental payments on time perfectly for the past few years. But in January they went on a holiday and had all their money sitting in their savings account – not the transaction account where the rental payments come from.
Their weekly rental came out on Monday from their transaction account, where there wasn’t enough money, which caused their rental to go into default and an overdrawn fee to be charged.
Their bank declined their pre-approval because of poor rental conduct. Fortunately, our team at Hunter Galloway were able to show there was enough money in their savings account, and because they were on holiday, we were able to get their decline overturned!
Ways to navigate late rental payments
- Can you show it was a timing issue? Maybe there were delays in transferring between your accounts?
- Was it an administrative error? Can you show direct debits were not set up correctly?
- Did you have money in other accounts? If you can explain it was in the wrong place, it might be okay.
Missing a rental payment doesn’t mean the end of the world, and your home loan should not get declined. We can help you apply with the right lender for your situation to make sure your home loan gets approved, so speak with our home loan experts or call us on 1300 088 065.
Read More: Get a free assessment with our mortgage broking experts
14. Spending Habits
When you apply for a home loan, nearly all banks will want to see your last 3 months (some even want to see 4 months!!?) daily transaction account statements.
As crazy as it might sound, if you spend too much at Zara, Dan Murphy’s or even Sportsbet on the weekend, it could affect your home loan application. In addition, if you are subscribed to websites like OnlyFans, the banks will see it in the same light as a gambling addiction.
This is because the bank will look at your day-to-day spending habits from the past month, look at these costs and annualise them to determine what it costs you to live each year. And if you had a particularly expensive month, it could reduce how much the bank is willing to lend you!
Case Study: Tara's bank declined her loan because of a recent holiday?!
For example, Tara has recently come back from a trip to Sydney and wants to apply for a pre-approval through her bank, Suncorp. They ask to see her last 4 months day to day statements, where they go through her accounts line by line and work out she had, on average, spent $2,000 per month in entertainment expenses (food, drinks, movies, pub, concerts).
On top of this, she spends $1,532 on other living expenses like health care, transportation and internet costs (not including rent). In total, her monthly living expenses are $3,532, and Tara’s after-tax income is $4,000, which only leaves $468 that could go towards future mortgage repayments.
Suncorp Bank declined her loan because, on paper, she did not have enough income to prove her propensity to make her mortgage repayments.
Our Credit Experts at Hunter Galloway reviewed Tara’s bank statements and showed that her expenses from the past month were abnormally high, as she was on holiday. They included several once-off expenses like aeroplane tickets, taxis to and from the airport, eating out at restaurants, and hotel costs, and they were able to get her home loan approved.
Ways to explain your living expenses
- Have you gone on holiday in the past 3-4 months?
- Did you have any large one-off expenses like aeroplane tickets?
- Check your statements are consistent with the information given.
High living expenses don’t mean the end of the world, and your home loan should not get declined. We can help you apply with the right lender for your situation to make sure your home loan gets approved so speak with our Home Loan Experts or call us on 1300 088 065.
Read More: 16 [easy] Tips to Find the Best Mortgage Broker in Brisbane
15. Decreases In Income
At the time that your pre-approval was given, you could have been working more hours or received a bonus, which the bank used to determine the total amount they could lend you.
This is fairly common for casual employees, whose hours fluctuate week by week, and since your home loan was pre-approved, your hours might have dropped, and as such, your income has also decreased, causing the bank to decline your home loan after pre-approval.
Different banks substantiate your income in different ways. If there is a fair reason for your reduction in income, they might consider using the previous amount provided you give some extra documentation.
Type of Income | Bank A | Bank B | Bank C |
Casual Income | Weekly pay x 46 Weeks | Weekly pay x 52 Weeks | Using Year to Date Figure from payslip |
For example, Matthew works as a barista and is employed casually. His hours can decrease when there are public holidays like Easter or Christmas. He gave his bank the December payslip, and his loan was declined because they thought his income had decreased.
Different banks assess casual income differently:
- Bank A, assessed his annual income as $500 x 46 = $23,000
- Bank B, assessed his income as $500 x 52 = $26,000
- Bank C, assessed his income based on his year to date payslip figure which annualised to $30,000 because he ordinarily works much more hours during a regular week
To use this income, we will need:
- Your 2 Most Recent Payslips
- Your Most Recent Years Group Certificate / PAYG Assessment Notice
- If possible, your most recent year’s tax return.
A temporary decrease in income doesn’t mean the end of the world, and your home loan should not be declined. We can help you apply with the right lender for your situation to make sure your home loan gets approved, so speak with our Mortgage Broker Brisbane Home Loan Experts or call us on 1300 088 065.
Read More: Loans for people with unique employment
16. Working For Family
Working for a family member can have its perks, but it can be a really big pain when you are applying for a home loan, and it is a common reason to have your loan declined after pre-approval.
Working for a family member can include anyone from your parents, spouse, de-facto, grandparents, brothers, sisters, children, brother-in-law, sister-in-law or any legally appointed guardian… so it’s fairly broad!
17. The Type Of Rental You Receive
Each bank has its own way of reviewing the rental income you receive from investment properties. Normally, they will take 80% of the total rent you will receive, but there are cases where they will use a lower figure.
Case Study: Airbnb Rental Income on Investment Property
For example, if you rent out a spare bedroom or use Airbnb Rental Income, some banks will only use 50-60% of the gross rental income because it is considered short-term (riskier) than an ordinary rental investment property.
Other banks will accept the rental income detailed on the property valuation.
At Hunter Galloway, we work with some banks that will allow you to use 80% of the total rental income you get from short-term rentals like Airbnb and Stayz, provided you can give your most recent tax return showing the total income and expenses from the rental.
Call us on 1300 088 065 or complete our online enquiry form to see if the type of rental income you receive can help you qualify for a loan and turn around your home loan decline.
Type of Rental Income | Bank A | Bank B | Bank C |
Standard Rental | 80% of Gross Rental | 80% of Gross Rental | 75% of Gross Rental |
Student Accommodation | 60% of Gross Rental | 60% of Gross Rental | 60% of Gross Rental |
DHA Lease | No | 100% of Net Rental | 75% of Gross Rental |
Serviced Apartment | No | 60% of Gross Rental | 60% of Gross Rental |
Holiday Rental | No | 80% of Gross Rental | 60% of Gross Rental |
Short Term Rental (e.g. AirBNB, Stayz, Guest-housing) | No | 80% of Gross Rental | 50% of Gross Rental |
Commercial Rental | 70% of Gross Rental | 70% of Gross Rental | 70% of Gross Rental |
To use this income, we will need:
- Your most recent Airbnb statement showing receipt of rental within the last 120 days.
- Your 2 recent years’ PAYG group certificate
- Most 2 recent years’ tax return + ATO Notice of Assessment
Read More: complete online enquiry to review your rental income and see if you qualify
18. Used Your Deposit
Home loan pre-approvals can last up to 6 months, so the amount of deposit you had in January might have changed by the time you find a home in June… but what can you do if you used your deposit?
If you have used your deposit, you can::
- Look for a lender that will lend you a higher loan amount and require less deposit. We have lenders that can do up to 95% LVR loans and 100% LVR if you have a guarantor.
- Ask your parents or a relative to gift the deposit amount you are short.
- Look at a brand new property so you qualify for the $15,000 Queensland First Homeowners grant.
- Consider buying a cheaper property to reduce how much deposit is needed.
Not having enough deposit doesn’t mean the end of the world, and your home loan should not get declined. We can help you apply with the right lender for your situation to make sure your home loan gets approved so speak with our Home Loan Experts or call us on 1300 088 065.
Read More: How much is the First Homeowners Grant
19. Buying In A High-Density Area
The banks usually see a high-density unit complex as a unit or apartment complex with more than 50 units and over 4 stories high. In such cases, the banks will want a higher deposit and impose other restrictions on apartment size.
Other banks will define high-density areas based on the specific postcode. For example, Brisbane CBD postcode 4000 is considered a high-density area.
In other cases, some banks will be ok with lending on apartments but have restrictions based on the following:
- The suburb or postcode where the unit is located, sometimes with restrictions based on high density or inner-city locations.
- How many floors the block of apartments has, sometimes with restrictions when it is higher than 4 stories.
- The total floor area inside the apartment, with restrictions if it is less than 40 square metres.
- If the bank already has too much lending in the building you are wanting to buy in.
Some banks will allow you to borrow up to 95% of the purchase price of a high-density apartment. Call us on 1300 088 065 to see if you qualify or complete our online enquiry form.
Type of Property | Bank A | Bank B | Bank C |
High Density (MaxImum LVR) | 65% | 90% | 95% |
Other Restrictions | Minimum apartment size 1 bedroom 50 sqm and 2 bedrooms 60 sqm | Maximum LVR depends on factors like borrower type, loan amount, property location and valuation report | Has to be an owner occupied purchase (i.e. you will live there). |
To buy a unit in a high-density area, you must:
- Ask your mortgage broker in Brisbane to check if your bank will accept the property
- Arrange a bank valuation to see if there are no adverse comments on the unit
- Double-check the internal floor area of the apartment
Read More: How to find the best home loan in Brisbane
20. Saving History
If you are borrowing with a lower deposit, the banks want to get an understanding of your savings history – they look for something called genuine savings, which is just another way of asking to see funds that you have saved yourself.
In other words, it is savings that have been sitting in your account for 3 or more months, and in recent times, banks want to see at least 5% of the purchase price as genuine savings.
This does depend on the lender because there are cases where you can be borrowing with less than a 10% deposit and not need to show genuine savings provided you meet some criteria.
The following are considered substitutes for genuine savings:
- Equity held in property
- Rental history as demonstrated over a 6-month period
- Term Deposits
- Shares held
Each bank has a unique policy on genuine savings, which usually depends on how much deposit you are putting down for the property.
Not having genuine savings doesn’t mean the end of the world, and your home loan should not get declined. We can help you apply with the right lender for your situation to make sure your home loan gets approved so speak with our Home Loan Experts or call us on 1300 088 065.
Type of savings | Bank A | Bank B | Bank C |
Genuine Savings | Over 85% LVR | Over 90% LVR | Over 80% LVR |
To use Rental History to demonstrate genuine savings, you need a letter from the real estate agent confirming the following:
- Full names of tenants
- Address of the property you tenanted
- Date you started renting the property
- Amount of rent paid per week, month or fortnight
- Confirmation that you have not missed any payments
Read More: Arrange a time to meet with one of our team
21. Purchasing A Property In A Flood Zone
There are restrictions to properties located in flood zones with a greater than a 1 in 100 chance of flood, especially if you are buying a house in Brisbane.
This is sometimes referred to as the Q100 flood level, which is a gauge of the height of the water in previous floods. Some lenders will simply not lend against a property located in a flood-prone area.
You can see if your property is in the flood zone by checking the Flood Awareness Map on the Brisbane City Council Website or if it is in one of these postcodes:
Flood Prone Postcodes in Brisbane | Suburbs Affected by Flooding in 2011 |
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If you want to buy in a flood zone, it is not impossible! There is hope if you are purchasing a house in a flood zone!
Some lenders will lend against a property in a flood-prone area provided you have:
- Comprehensive flood cover insurance
- A satisfactory valuation or survey report
They will also factor in other items like the loan amount, property type, location and loan structure.
Buying a property in a flood zone doesn’t mean the end of the world, and your home loan should not be declined. We can help you apply with the right lender for your situation to make sure your home loan gets approved so speak with our Home Loan Experts or call us on 1300 088 065.
Read More: Research if your home has gone swimming (i.e. flooded in Brisbane)
22. Purchasing A Property With Renovation Issues
The headline saying the worst house on the best street or the renovator’s delight might seem like a great idea…
…until the bank declines your loan after your pre-approval!
The banks generally do not like houses that are incomplete or unlovable. Missing kitchens and bathrooms with holes in the floor are a pretty firm decline from most banks unless you have more than a 20% deposit.
There can be options depending on how substantial the renovation issues are. You must find out:
- How bad is the house? Is it structurally sound?
- Are they just cosmetic issues?
- Will it cost less than $50,000 to fix?
- Can you provide quotes or a building contract to correct this?
- Are you going to be able to live in the house while you renovate?
Buying a property with renovation issues doesn’t mean the end of the world, and your home loan should not get declined. We can help you apply with the right lender for your situation to make sure your home loan gets approved so speak with our Home Loan Experts or call us on 1300 088 065.
23. Changes In Credit Criteria
Bank credit policy changes all the time, and with the Banking Royal Commission, their credit criteria policy is changing even more often.
So what happens if you applied for your pre-approval in February, and when you find a property in March, the credit criteria has changed? Your loan might be declined after it has been pre-approved
What can you do to help navigate changes to your bank’s credit criteria?
Make sure you are working with the best mortgage broker in Brisbane.
Ask your mortgage broker lots of questions before choosing to go ahead with them.
Some of the questions you can ask include:
- How many years of experience do you have as a mortgage broker in Brisbane?
- What did you do before you were a mortgage broker?
- Do you own any property yourself? Have you got a home loan yourself?
- How many properties do you own in Brisbane?
- What home loan customers do you typically help?
- How many home loans do you do each week?
- What is the average home loan size you provide?
Read More: 21 easy tips to find the best mortgage broker in Brisbane.
24. Failing The Bank's Credit Score
Lots of banks use credit scores to understand your credit history instead of manually going through your past transactions.
Your credit score is calculated using several factors, including:
- How many credit enquiries you’ve had in the past 3-6 months
- The types of finance you have applied for in the past 12 months
- If you have any overdue or defaulted debts in the past 5 years
- If you have been bankrupt in the past 10 years
- If you have had any late payments on your electricity, gas or mobile phone service
- If you have had any interest free, or afterPay sale finance
- If you have had any court writs or judgments
Case Study 1: First Home Buyer got his loan declined because he failed the bank's credit score test
For example, Tyrone was applying for a home loan through his bank but had applied for a personal loan, an interest-free loan, and 2 credit cards in the past 4 months. He was recently late on his electricity because he had been away for work.
His bank declined his loan after his original pre-approval because he had a bad credit score.
Our team at Hunter Galloway were able to find Tyrone a bank that didn’t credit score home loan applicants. We explained to the bank that Tyrone had been travelling, which is why he was late on his electricity bill and didn’t actually proceed with the personal loan.
Case Study 2 - Loan rejected over a missed payment 13 years ago
Late last year, I helped Nick with a home loan application. After reviewing his home loan options, he decided to proceed with the bank he had been with for the past 17 years. His decision was made easy as they had an amazing fixed rate on offer. Nick was a perfect applicant; his credit file had an incredibly high score of over 900. He had a stable full-time job, no debt and was looking to put down a 20% deposit — it didn’t get much better than this. It wasn’t long until we lodged his application. Days later, I received a call from the bank’s assessor, and I was excited, expecting to hear good news. The assessor started out by saying, Josh, I’m afraid we can’t support this application.
I had to take a seat and say to the assessor that we’re talking about Nick’s application here, right? The assessor continued by saying that Nick had failed to pass the bank’s credit score card, and from what I can see, he had an unpaid default with the bank about 13 years ago.
Remember that banks have very long memories and even if it doesn’t show up on your credit file, your history with the bank will and can be used against you.
Failing a bank’s credit score criteria doesn’t mean the end of the world, and your home loan should not get declined. We can help you apply with the right lender for your situation to make sure your home loan gets approved so speak with our Home Loan Experts or call us on 1300 088 065.
25. An Unreliable Pre-approval
Not all banks are the same when it comes to assessing a pre-approval home loan, also known as a conditional approval, indicative approval, approval in principle or home seeker, depending on the bank you use.
In most cases, a pre-approval is just an indication that the bank is okay with considering approving your loan; they may just complete a credit check and not check any of your documents and wait until you lodge a full mortgage application to do this.
A full mortgage application is done when you find a property and means the lenders will complete the entire assessment of your loan. They will verify your payslips, bank statements, income information, savings information, and any liabilities. When you get a pre approval, you have to be 100% sure they can lend you the money.
Having your loan declined after pre-approval doesn’t mean the end of the world. We can help you apply with the right lender for your situation to make sure your home loan gets approved so speak with our Home Loan Experts or call us on 1300 088 065.
26. The Pre-approval Expired
Bank pre-approvals are usually valid for 90 to 180 days or 3 to 6 months. This is also referred to as the approval-in-principal period…
But what happens if you find a house after 6 months and 1 day? It’s back to the drawing board, and you will need to give the bank brand-new payslips and bank statements…
Different banks have different requirements at this stage. They can range from:
- Confirming with the bank that your financial position has not changed over the past 90-180 days.
- Giving the bank brand new supporting documents, payslips, bank statements and identification.
The downside is if your situation has changed, the bank could possibly decline your loan even after it was pre-approved a few months back…
Having your loan declined after pre-approval doesn’t mean the end of the world. We can help you apply with the right lender for your situation to make sure your home loan gets approved so speak with our Home Loan Experts or call us on 1300 088 065.
27. Forgetting A Few Details
Applying for a home loan involves lots of different documents and pieces of information. You need to give details of any credit cards, transaction accounts and other information you have open, and forgetting details here and there can cause massive problems in the eyes of the banks.
The banks will need to see 3 to 4 months of your day-to-day transaction statements, and if you forget to mention a credit card that has direct debits coming from your main account, it can cause a big headache. The banks consider this an undisclosed debt or liability.
With some banks, having undisclosed liabilities can mean an instant decline. A common one we see is an interest-free credit card you might have gotten a few years ago from Harvey Normans, which you haven’t used for years and have completely forgotten about.
So what can you do to make sure you don't miss any debts?
Ask your mortgage broker to get a copy of your credit report
Your credit report will show you any credit enquiries you’ve done over the past 7 years and will help jolt your memory!
Get your mortgage broker to double-check your day-to-day account statement.
Payments from credit cards and AfterPay will generally be coming from your day-to-day account; your mortgage broker can run through this with you to double-check if there isn’t anything in there you might have accidentally forgotten about!
Having your loan declined after pre-approval doesn’t mean the end of the world. We can help you apply with the right lender for your situation to make sure your home loan gets approved so speak with our Home Loan Experts or call us on 1300 088 065.
28. Banks Misunderstanding Your Expenses
Sometimes, the bank may misunderstand the expenses they see on your statement. If you have a friend or family with a newborn, you have a fair amount of transactions to retailers such as Baby Bunting. The bank’s immediate thought is that you’re hiding something. So before they get any ideas, it’s best just to explain the situation.
Case Study: Loan declined over IVF
Probably one of the worst things I’ve seen the bank do is decline one of our customers point-blank without even giving us a chance to explain the situation. Jane was single and excelling in her career, kicking goals and about to buy her first home without family help. She had worked hard to save up a massive deposit and was a true inspiration. Upon receipt of her application, the bank simply declined it, having reviewed her transaction uncovered payments to an IVF Clinic. Her application was rejected on the spot for non-disclosure and a servicing shortfall. See, the bank assumed that she had a dependent child, of which they weren’t aware. Jane, in fact, wasn’t looking to conceive. She had gone to an IVF Clinic to freeze her eggs. After informing the bank of this, they overturned the decision.
29. Being Too Young… Or Too Old
Although there are laws (check out the Discrimination Act) to make sure banks don’t discriminate because of your age, these days, it is common for lenders to ask for an exit strategy in paying off your home loan if you are over 45 years old.
In effect, these restrictions can limit your mortgage options because of your age.
While different banks have different policies, some common exit strategies for anyone aged over 45 years old are:
- Moving to a smaller house and downsizing once you reach retirement age
- Selling other investment properties or shares.
- Releasing funds from your superannuation to pay down the loan.
- Recurring income received from your superannuation fund.
Having your loan declined after pre-approval for being too young (or too old) doesn’t mean the end of the world. We can help you apply with the right lender for your situation to make sure your home loan gets approved so speak with our Home Loan Experts or call us on 1300 088 065.
Bonus: What Happens After Your Home Loan Is Approved?
So you’ve got your approval letter from the bank, you know you’re unconditionally good to go, and your purchase is around the corner. What do you do? What is the process from here?
The 1st step is to sign your loan documents.
This usually includes the mortgage document from the government, your loan contracts with all your interest rates, general terms and conditions, your direct debits—all the awesome stuff to do with your home loan. If you do have a finance clause, you don’t need to sign the loan contracts to go unconditional on your Contract of Sale. You just need to provide the approval letter that you got from your mortgage broker.
The 2nd step is to talk with your solicitor or conveyancer.
They usually have important documents for you to sign. Tell them you have signed your loan contracts and ask if there are any stamp duty concessions or first homeowner grant applications you need to make. All of this needs to happen before settlement.
Also, talk to your solicitor or conveyancer to ensure there are no further adjustments with the dollars and cents at settlement. If there are any searches pending with the solicitor, follow them up and make sure everything is in order.
The 3rd step is mail, power, and internet.
In other words, get your utilities connected a few days before you move in. You don’t want to move into your new house and have no power for a few days. Things like the internet can take weeks to get connected. So, now that your loan is approved, you have signed your loan contract, speak to your solicitor, and know the day you are moving – get your utilities connected.
The 4th step is to arrange for pre-settlement inspection.
Most first-time home buyers homebuyers forget this crucial step. Two or so days before settlement, you should go to the property to ensure it is still the same as when you originally saw it. For example, if there is now a hole in the wall or they have ripped out the dishwasher, then you have a few days to sort it out and even get your money refunded before settlement takes place. Unfortunately, once you settle, any issues become your problem.
The final step is to crack the champagne!
Well, after you pick up the keys. Usually, around 3 pm on the day of settlement, your solicitor will call and tell you that the settlement has gone through, and you can collect your keys from the real estate agent. Congratulations, you are now a homeowner!
Frequently Asked Questions (FAQs)
Some common reasons include switching jobs, being a contractor for less than 12 months, changes in the bank's assessment rate, being self-employed, changes in income or employment status, taking on new debts or credit cards, too many recent credit inquiries, missed bill payments, changes in living expenses, and expired pre-approvals.
Yes, switching jobs after getting pre-approved can potentially lead to your loan being declined, even if you're earning the same or more money. Some banks want to see you in a role for at least 6 months before approving a loan.
Being a contractor for less than 12 months can make it more difficult to get approved for a home loan. Some banks are hesitant to lend to contractors who have been in their role for a short time. However, some lenders will consider contractors with less time in their current role.
The assessment rate is the interest rate banks use to determine your borrowing capacity, usually 2-3% higher than current rates. If this rate changes between pre-approval and final approval, it can reduce how much you can borrow and potentially lead to a declined application.
Yes, some banks have stricter requirements for self-employed borrowers. Common issues include large changes in profit between financial years or not having the most recent tax returns completed. However, many lenders do offer options for self-employed borrowers.
Some banks view certain industries or occupations as higher risk. For example, an underground coal mine worker may be considered riskier than a high school teacher. This can impact your ability to get approved by some lenders.
If you are a casual or contract worker without holiday pay, taking time off work can potentially impact your income and affect your loan application if it reduces your most recent payslips.
Banks have different policies on assessing variable income, such as overtime and bonuses. Some may only consider 50-80% of this income, while others may use 100% if you have a consistent history of receiving it.
Many banks will accept income from Uber driving or a second job, but they typically want to see at least 12 months of consistent income from these sources. Some banks may only use a portion of this income in their assessment.
Yes, taking on new debts like credit cards after getting pre-approved can potentially lead to your loan being declined as it changes your financial position and borrowing capacity.
Banks look at your credit report and may decline applications due to issues like defaults, multiple credit inquiries, or late payments on bills. Some use credit scoring systems to automatically assess applications.
Yes, some lenders will ask for 12 months of rental history and may decline applications if there are multiple late payments, which can indicate poor financial management.
Banks will typically review 3-4 months of your transaction account statements to assess your living expenses. High levels of discretionary spending can reduce how much they are willing to lend you.
A decrease in income after pre-approval can potentially lead to your loan being declined, as banks will re-assess your financial situation before giving final approval.
Working for a family member can make it more difficult to get approved for a home loan with some lenders, as they may view the income as less stable or reliable.
Policies vary between lenders. Some banks will accept a portion of short-term rental income, such as Airbnb, while others may not accept it at all or require a longer history of this income.
Using some of your deposit funds after pre-approval can potentially lead to your loan being declined if you no longer meet the lender's deposit requirements. You may need to find additional funds or look at other loan options.
Yes, many banks have restrictions or require larger deposits for apartments in high-density areas or buildings with more than 50 units and over 4 stories. Policies vary between lenders.
Genuine savings typically refers to funds you have saved yourself over at least 3 months. Most banks want to see at least 5% of the purchase price as genuine savings for loans with smaller deposits.
Yes, some lenders have restrictions on properties in flood-prone areas. You may need to get specific flood insurance or meet other requirements to get approved
Many banks are hesitant to lend for properties that are incomplete or uninhabitable. You may need a larger deposit or to look at specific renovation loan products for these types of properties.
If your pre-approval expires, you will typically need to reapply and provide updated financial information. This means the bank will re-assess your situation, which could potentially lead to a different outcome.
Pre-approvals are typically valid for 3-6 months, depending on the lender. After this time, you'll need to reapply.
While there are laws against age discrimination, many lenders will ask for an "exit strategy" for borrowers over 45, showing how the loan will be repaid in retirement. This can limit options for older borrowers.
After approval, you'll need to sign loan documents, work with your solicitor on settlement details, arrange utilities for your new home, do a pre-settlement inspection, and then collect the keys on settlement day.
It may be more difficult, but it's not impossible. Some lenders specialise in bad credit home loans. You may need to explain past credit issues and may face higher interest rates or fees.
Banks typically require recent payslips and tax returns and may contact your employer directly. For self-employed borrowers, they usually want to see 2 years of tax returns and financial statements. adipisicing elit, sed do eiusmod tempor incididunt ut labore eten dolore magna aliqua. Ut enim ad minim veniam, quis exercitation ullamco laboris nisi ut aliquip ex ea com mmodo consequat.
Failing to disclose debts or credit cards can be seen as providing false information and may lead to your loan being declined. It's important to be completely transparent about your financial situation.
This varies by lender and your circumstances, but typically you need at least 5-20% of the purchase price. Loans with less than 20% deposit usually require Lenders Mortgage Insurance.
Some lenders offer home loans to temporary residents on certain visas, but you may face restrictions on loan terms or need a larger deposit. Policies vary significantly between lenders.
Next Steps And Settling Your New Home
Our team here at Hunter Galloway is here to help you buy a home in Brisbane.
Unlike other mortgage brokers who are just one-person operators, we have an entire team of experts to help make your home loan journey as simple as possible.
If you want to get started, please get in touch here, and we can book a time that suits you – either a phone call information session or a face-to-face meeting (which doesn’t cost you anything).
More Resources For Home Buyers…
- Comprehensive first home buyer guide
- First Home Owners Grant QLD -Are you eligible?
- LMI Waivers: the definitive guide
- 22 mistakes nearly all first-home buyers make
- 16 hidden costs of buying a home in Brisbane
Note: Information is current as at November 2024 and subject to change without any further notification. Any home loan application is subject to credit approval and verification of all supporting documentation. Consider this article as general in its nature and not to be taken as advice.
Ready to take the next step toward buying? We’re happy to help. Schedule a call today with a Home Loan Expert from Hunter Galloway, the home of home buyers.
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