10 Reasons Why You Struggle To Secure A Home Loan

Universal Finance • December 15, 2025

10 Reasons Why You Struggle To Secure A Home Loan

Applying for a home loan often involves more complexity than expected. You prepare the documents, calculate the deposit, submit the application — and still get declined. In many cases, there’s little explanation, which makes it even more frustrating.


Knowing why a lender says no to your home loan application is the first step towards turning things around. Below, we break down 10 common reasons why borrowers struggle to secure a home loan in Australia, plus practical steps to help improve your chances.


Why home loan applications get rejected (even when you think you’re ready)


There’s no single formula for home loan approval in Australia, with each lender having their own risk appetite, policy quirks and eligibility criteria. If your home loan application has stalled — or you want to avoid common mistakes before applying — start here.


1. Your deposit is too small


Even though some lenders accept deposits as low as 5%, anything under 20% typically triggers lender’s mortgage insurance (LMI), which adds to your costs. If your deposit is small and your application includes other risk factors (e.g. unstable income or high debt), it can push the loan outside a lender’s comfort zone.


Try this: Consider saving a bit more or looking into alternative lenders who may accept low-deposit applications with fewer restrictions.


2. You have a poor or thin credit history


Late payments, defaults or too many credit enquiries can damage your chances of getting a home loan approved. But even no credit history can be an issue; lenders want evidence of responsible borrowing and repayment behaviour.


Try this: Request a copy of your credit file before applying. Address any red flags and avoid unnecessary credit applications in the lead-up to your home loan.


3. Your income doesn’t meet the criteria


How your income is structured is as important as how much you earn. Bonuses, commissions, contract roles and casual work are treated differently from full-time PAYG income. Self-employed borrowers often get assessed on tax returns, not their actual current income.


Try this: Use your most recent and complete financial documents. If you're self-employed, be prepared to show BAS statements or alternative income verification.


4. You have too much existing debt


Even if you're making all your repayments on time, a large credit card limit or multiple personal loans can reduce your borrowing power. Lenders calculate your debt-to-income ratio to gauge whether you can manage more repayments on a home loan.


Try this: Pay down smaller debts or close unused credit cards before applying. Reducing your overall liability can significantly improve your application.


5. Your spending habits raise concerns


Lenders now assess your living expenses in detail, including subscriptions, travel and dining. Even Afterpay or buy-now-pay-later services can be a red flag.


Try this: Review your bank statements for the past three months and tighten up your spending. Cancel unnecessary subscriptions and avoid large purchases before applying.


6. You’re applying for the wrong type of loan


Not all home loans in Australia are the same. Applying for a loan structure that doesn’t match your profile — for example, interest-only when you’re a first home buyer — can make lenders cautious.


Try this: Match the loan structure to your long-term plan. Use this to demonstrate that you’ve thought ahead and aren’t overreaching financially.


7. You’ve recently changed jobs


Lenders generally prefer applicants who’ve been in stable employment for at least 6–12 months. A probation period or recent switch to a new industry can reduce your chances, especially without other strong supporting factors.


Try this: If possible, wait until you're out of your probation period before applying for a home loan. Alternatively, consider lenders who are more flexible with employment history.


8. Your application lacks documentation


Missing payslips, unclear ID documents or inconsistent information can delay or derail your application. Even errors like mismatched addresses can lead to unnecessary scrutiny.


Try this: Double-check everything before you apply, and have all documentation ready.


9. The property you’re buying isn’t lender-friendly


Unusual properties (e.g. tiny apartments, rural land or commercial/residential hybrids) may fall outside what a lender is comfortable securing a home loan against. Some locations or property types are seen as higher risk.


Try this: If you’re not buying a standard home in a metro area, talk to a broker who understands which lenders specialise in alternative property types.


10. You’re applying to the wrong lenders


Just because one lender said no doesn’t mean all will. Some banks are strict on policies that others are flexible about. Many people get declined simply because they applied to a lender that doesn’t cater to their profile.


Try this: Use a broker who understands which lenders are a better fit for your situation, especially if you’re self-employed, a first home buyer or investing.


Struggling to secure a home loan? Universal Finance Corporation can help


If you've hit a wall with your application, Universal Finance Corporation can help you move forward. We work with borrowers who don’t fit the typical mould: first home buyers, self-employed professionals, high-income earners and those investing for the first time.


Our team helps match you with the right lender and loan structure for your situation. Book a free consultation for personalised advice, or use our calculators to start mapping out your borrowing power today.

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