What Banks Actually Look At When Assessing Your Loan
The 5 key things lenders check when you apply for a home loan — income, expenses, credit, employment and deposit — and how to strengthen each one.
When you apply for a home loan, the bank’s credit assessor is running through a predictable checklist. Knowing what they look at lets you strengthen your application before you apply.
1. Income
What they assess:
- Base salary, confirmed via payslips and your employer
- Overtime, bonuses, allowances (some accept 100%, some only 80%)
- Rental income on existing investment properties
- Self-employed income via tax returns or alt-doc
How to strengthen it: minimise casual unused income sources, ensure your payslips match your tax returns, and document all allowances you regularly receive.
2. Expenses
The living expense category lenders scrutinise most. They’ll compare what you declare to the HEM (Household Expenditure Measure) benchmark. If your declared expenses are below HEM, they use HEM. If above, they use your higher figure.
How to strengthen it: clean up your bank statements for 3 months before applying. Cancel unused subscriptions. Be honest — understating is a red flag lenders notice.
3. Credit history
They pull your credit file to check:
- Credit enquiries (multiple = concern)
- Defaults, late payments, collections
- Current credit card and personal loan limits (even if unused, the limit counts)
How to strengthen it: check your credit file free at Equifax or illion. Reduce credit card limits you don’t need. Avoid applying for other credit in the 3 months before a home loan.
4. Employment stability
Most lenders want to see:
- 6-12 months in your current role
- Or 2+ years in the same industry if you’ve changed jobs
- PAYG vs contract vs self-employed assessed differently
How to strengthen it: if you’re planning a job change, time it carefully. Apply for the loan before changing jobs if possible, or wait until you’ve completed probation.
5. Deposit & savings pattern
They check:
- How much deposit you have
- Where it came from (genuine savings, gift, sale of asset)
- Savings pattern over the last 3 months
How to strengthen it: if you have savings, keep them in a dedicated account. If the deposit is a gift, get a signed gift letter from the giver. Don’t make sudden large deposits shortly before applying without explanation.
What this means for you
Banks have strict rules, but they’re not the same across lenders. One bank’s “decline” is another bank’s “approved.” This is exactly where a broker adds value — we know which lender is the best fit for your specific profile.
General information only. Each lender applies their own policies which change regularly.