What Not to Do When Applying for a Home Loan

Applying for a home loan when you're unprepared is one of the most expensive mistakes you can make in Strathfield's property market.

The difference between an approved application and a declined one often comes down to what you did in the six months before you applied, not just what appears on the application form itself. Lenders assess your financial behaviour, employment stability, and credit history long before you walk into their office or submit an online form. Understanding what undermines your application lets you approach the process with confidence and clarity.

Don't Change Jobs Right Before You Apply

Lenders want to see at least three to six months of continuous employment in your current role before they'll assess your income as stable. If you've just started a new job, even if it pays more than your previous one, most lenders will either decline your application or assess you on a reduced income until you pass probation. Casual and contract workers face even stricter requirements, often needing 12 months of consistent earnings before lenders will consider the full amount.

Consider a buyer who accepted a higher-paying role three weeks before applying for finance on a townhouse near Strathfield Station. Despite earning $15,000 more annually, the lender wouldn't assess the new income because probation hadn't been completed. The buyer's borrowing capacity dropped by over $80,000, pricing them out of their intended purchase. They had to wait another four months before reapplying, by which time property values in the area had moved beyond their revised budget.

If you're planning to change jobs and buy property, secure your home loan pre-approval first, then make the career move. Pre-approvals typically remain valid for three to six months, giving you a buffer to transition roles without jeopardising your finance.

Don't Apply for Multiple Credit Products in a Short Window

Every time you apply for credit, whether it's a credit card, car loan, or even a buy-now-pay-later account, the lender makes a credit enquiry that appears on your credit file. Multiple enquiries in a short period signal financial stress to future lenders, even if you were simply shopping around for the lowest rate. Each enquiry can reduce your credit score, and too many in a six-month window can result in an automatic decline.

Beyond the credit score impact, new credit commitments reduce your borrowing capacity. A $10,000 credit card limit, even if you never use it, is treated as a $10,000 debt by home loan lenders when calculating how much you can borrow. The same applies to Afterpay, Zip Pay, and similar services.

If you're serious about buying property in Strathfield, close any unused credit accounts and avoid applying for new ones in the six months leading up to your application. If you need to compare loan options, work with a broker who can assess your scenario without triggering multiple credit enquiries.

Don't Spend Your Deposit Before Settlement

Your deposit needs to remain in your account from the time you apply through to settlement, and lenders will ask for updated bank statements right up until the day you finalise the purchase. If the balance drops significantly or unexpectedly, they'll ask where the money went. Large unexplained withdrawals can delay settlement or, in some cases, result in the lender withdrawing their approval entirely.

This becomes particularly relevant when buying in Strathfield, where settlement periods can stretch to 90 days or more depending on the contract terms. During that time, some buyers mistakenly believe the hard part is over and start spending on furniture, renovations, or holidays. Even if you're using saved income rather than borrowed funds, the lender doesn't know that without documentation, and any variation from what they've already assessed raises red flags.

In a scenario like this, a buyer received unconditional approval on a property near Strathfield Park but then withdrew $12,000 to buy furniture before settlement. The lender requested updated statements two weeks before settlement, saw the withdrawal, and asked for a statutory declaration and proof the funds came from savings, not undisclosed debt. Settlement was delayed by 10 days while the buyer scrambled to provide paperwork, and they came close to breaching the contract.

Keep your deposit and any additional funds earmarked for settlement costs exactly where they are until after you've received the keys. If you need to make large purchases, wait until after settlement or discuss it with your broker first so they can advise whether documentation will be required.

Don't Ignore Your Credit File Until After You've Applied

Many buyers assume their credit file is fine because they've never missed a payment, but errors, outdated information, and forgotten accounts can all appear without your knowledge. A single default, even one you've disputed or paid off, can remain on your file for years and affect your ability to borrow. Some buyers discover defaults they didn't even know existed, such as unpaid utility bills from a previous address or mobile phone accounts closed years ago.

You're entitled to a complimentary copy of your credit file from the major reporting agencies, and reviewing it before you apply gives you time to dispute errors or pay off minor debts that could otherwise derail your application. Lenders don't just look at your score; they review every detail, including the type of credit you've held, how long you've held it, and whether you've ever exceeded limits or missed payments.

If you're planning to apply for a home loan in the next six months, pull your credit file now and address anything that looks incorrect or outdated. If there's a default you weren't aware of, paying it off and providing evidence of payment can sometimes allow a lender to overlook it, particularly if it's more than two years old.

Don't Assume All Lenders Will Treat Your Income the Same Way

Not all income is treated equally by lenders, and understanding how your specific income type is assessed can mean the difference between approval and decline. Self-employed borrowers, commission earners, and those with rental income or investments all face different assessment criteria depending on which lender you approach. Some lenders will assess 100% of your base salary but only 80% of your overtime or bonus income. Others won't consider overtime at all unless you've been receiving it consistently for at least 12 months.

Rental income is another area where lenders vary significantly. Some will assess 80% of the rent you receive, others only 75%, and a few won't consider it at all if the property is negatively geared. If you're self-employed, most lenders will average your taxable income over the past two years, but some will accept a single year if your income has increased significantly and you can demonstrate the trend is sustainable.

Working with a broker who understands how different lenders assess different income types means your application goes to a lender who's likely to approve it, rather than one who'll decline it based on their specific policy. The right lender for a PAYG employee in Strathfield might not be the right lender for someone who's self-employed or earning commission, even if both buyers have identical deposit sizes and credit histories.

Don't Forget to Factor in All the Costs Beyond the Deposit

Many buyers focus entirely on saving the deposit and forget that settlement comes with a range of additional costs that need to be paid upfront. Stamp duty, conveyancing fees, building and pest inspections, and lender establishment fees can add tens of thousands of dollars to what you need in the bank before you can settle. In New South Wales, stamp duty alone can exceed $30,000 depending on the purchase price, and while some concessions exist for first home buyers, they don't apply to everyone.

Lenders will also want to see evidence that you have genuine savings, not just gifted funds or a sudden deposit from an unknown source. Genuine savings are defined as funds you've held in your account for at least three months, and lenders prefer to see a consistent savings pattern rather than a lump sum that appeared overnight. If your deposit includes a gift from family, most lenders will accept it, but they'll want a signed declaration confirming the funds are a gift, not a loan that needs to be repaid.

Before you start looking at properties in Strathfield, calculate the full amount you'll need for both deposit and settlement costs, then work backwards to understand how much you need to save each month. If you're not sure how much to budget, a broker can provide a breakdown based on your intended purchase price and deposit size.

Don't Rush Into a Fixed Rate Without Understanding the Limitations

Fixed interest rates offer repayment certainty, but they come with restrictions that can cost you significantly if your circumstances change. Most fixed rate loans limit how much extra you can repay each year, typically between $10,000 and $30,000 depending on the lender. If you exceed that limit, you'll be charged break costs, which can run into thousands of dollars. The same break costs apply if you want to refinance, sell the property, or switch to a variable rate before the fixed period ends.

Some buyers lock in a fixed rate because it feels safer, but then find themselves unable to make extra repayments when they receive a bonus or inheritance, or unable to refinance when rates drop further. Others discover too late that their fixed rate loan doesn't come with an offset account, meaning any extra savings sit in a separate account earning taxable interest instead of reducing the interest charged on the loan.

If you value flexibility and plan to make extra repayments, a variable rate or split loan structure might suit you over the long term. A split loan lets you fix part of your loan for certainty while keeping the rest variable so you can make extra repayments and access features like an offset account. Your broker can model different scenarios based on your income, savings habits, and how long you plan to hold the property.

Buying property in Strathfield means you're investing in an area with strong demand, established infrastructure, and proximity to schools and transport. Approaching the home loan process with preparation and clarity means you're not just securing finance, but setting yourself up to make the most of the opportunity without unnecessary delays or costs.

Call one of our team or book an appointment at a time that works for you.

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