How lenders assess a loan application

When it’s time for our clients to choose the right home loan, understanding the home loan application process can make all the difference.

When lenders assess a home loan application, it comes down to evaluating the risk involved with repaying the loan. Here are some key measures lenders use to assess the risk of our clients.

Income and employment history

It's not just about the figure but also the stability of income. This includes employment type (permanent, casual, contract), how long a client has been with an employer and the industry they work in. If a client has just started a new job they will need to provide at least two years history to demonstrate stable income over a longer period.

For self employed clients, there’s usually a bit more work that has to go into preparing. Because there are standard financial documents self employed people won’t be able to supply, lenders have what is know as a ‘low-doc’ loan. These are generally more scrutinised when being assessed by a bank, so there could be more work involved in preparing for these applications.


Of course bigger is better when it comes to a home loan deposit, however making sure our clients have genuine savings is also important. It's critical to show the client's ability to save over time. Regular and consistent deposits into a savings account make a good case for being able to pay off a loan.


Lenders also want to see copies of credit card and personal loan statements to review repayment capability. They want to see bills paid on time and staying within credit card limits.

Lenders also score applicants on their existing credit facilities and how they use them. It's a complex part of the process and a mortgage broker can help by understanding a client's credit situation.

As an example, a client with a low credit score might have more success applying with the lender they bank with. We can also complete a credit check with clients to uncover any prior defaults or unpaid bills. It's important to have these cleared before an application is submitted.

Knowing what information lenders are looking for means a client is more likely to submit a successful loan application the first time around.