Having your home loan declined can feel disheartening, especially when you’re ready to take the next step toward homeownership. But a decline doesn’t mean your dream is over. Understanding why your home loan was rejected is the first step to improving your financial position and increasing your chances of approval next time. With the right guidance, most borrowers can become eligible again.

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Below are the top reasons lenders decline home loan applications—and what you can do to strengthen your profile.

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1. Low Deposit

A small deposit increases the amount you need to borrow, which raises the lender’s risk. If the lender believes you’re not financially prepared, they may decline your application.

How to improve:

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• Save a larger deposit

• Reduce discretionary spending

• Consider lenders offering higher LVRs or family guarantee options

 

A bigger deposit not only boosts your approval chances but also reduces your repayments and may eliminate Lenders Mortgage Insurance (LMI).

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2. Poor Credit History

Late payments, unpaid debts, multiple credit enquiries or maxed-out credit cards can make you appear high-risk to lenders. How to improve:

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• Pay bills on time

• Reduce credit card limits

• Clear outstanding debts

• Check your credit report for errors

 

A clean and stable credit history shows lenders you can manage long-term financial commitments.

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3. Employment Instability

Lenders prefer applicants with steady employment and consistent income. If you’ve recently changed jobs or have been self-employed for less than two years, your application may be considered risky.

How to improve:

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• Maintain stable employment where possible

• Provide tax returns, BAS statements or accountant letters if self-employed

• Avoid large job changes during the application process

 

If you’re currently unemployed, approval is unlikely until stable income is established.

 

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4. Age and Loan Term

Your age can influence the loan term a lender is willing to offer. Older applicants may be asked for additional evidence showing they can meet repayments later in life.

How to improve:

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• Consider a shorter loan term

• Provide a clear exit strategy (e.g., superannuation, assets to downsize)

• Strengthen overall financial position

 

Lenders need confidence that you can comfortably repay the loan within your working life or through other assets.

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5. Purchasing a Unique or Unconventional Property

Properties that fall outside the “standard” lending criteria—such as tiny homes, rural properties, heritage-listed buildings, or highly unusual designs—can reduce the lender’s confidence in resale value.

How to improve:

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• Obtain a valuation early

• Speak with a broker experienced in niche property types

• Consider properties that meet mainstream lending requirements

 

Lenders want to ensure the property serves as strong security if it ever needs to be sold.

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6. Too Many Loan Applications

Multiple applications in a short timeframe can signal desperation or financial instability. Lenders can see this on your credit file and may decline you based on perceived risk.

How to improve:

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• Avoid lodging multiple applications

• Understand why you were declined before trying again

• Work with a mortgage broker who can match you to the right lender the first time

 

A strategic approach prevents unnecessary credit enquiries and protects your score.

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Everyone’s Situation Is Different — Speak With a Mortgage Expert

Every lender has different policies, and every borrower has unique circumstances. If your home loan was declined, we can review your situation, identify the issue, and help you get back on track.

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Contact us today to discuss your home loan options and improve your chance of approval.

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