.svg)
When doing anything for the first time, mistakes are bound to occur, and buying your first property...
Key Takeaways:
- Home loan rejections are common for first home buyers in Australia—don’t panic.
- Find out the exact reason for your rejection, check your credit report, and tidy up your finances before reapplying.
- Use a mortgage broker, consider first home buyer support schemes, and avoid multiple applications in a short time.
So, you’ve finally taken the plunge and applied for your first home loan—only to get that dreaded “no” from the bank. Ouch. It’s a gut punch, but you’re definitely not alone. Plenty of first home buyers hit this speed bump, and the good news is, it’s not the end of your property journey. Here’s what to do if your home loan is rejected in Australia, how to bounce back, and how to improve your approval chances next time.
Why Do Home Loan Applications Get Rejected in Australia?
First, let’s clear up why banks say no. The most common reasons are:
- Low credit score or patchy credit history
- Not enough deposit or savings
- Too much existing debt (credit cards, car loans, etc.)
- Unstable or insufficient income
- Inaccurate or incomplete paperwork
- Property doesn’t meet lender criteria
Sometimes, it’s just a matter of timing or a technicality. Other times, it’s a sign you need to tidy up your finances.
Step 1: Don’t Panic—And Don’t Reapply Straight Away
It’s tempting to rush out and apply with another lender, but that can actually make things worse. Every application leaves a mark on your credit file, and too many in a short time can drag your score down even further. Take a breath, regroup, and get strategic.
Step 2: Find Out Exactly Why You Were Rejected
Lenders have to tell you why they said no, so ask for a clear explanation. Was it your credit score? Your income? The property? Knowing the real reason is the only way to fix it.
Step 3: Check Your Credit Report
Grab a free copy of your credit report from Equifax, Experian, or illion. Look for:
- Errors or old defaults that shouldn’t be there
- Unpaid debts or late payments
- Too many recent credit enquiries
If you spot mistakes, get them fixed. If you’ve got some dings, start working on repairing them—pay off debts, set up direct debits for bills, and avoid new credit applications for a while.
Step 4: Review Your Finances
Take a good, honest look at your money situation:
- Deposit: Do you have enough? Most lenders want at least 5–10% genuine savings.
- Debts: Can you pay off or reduce any credit cards or personal loans?
- Income: Is your job stable? If you’re casual or self-employed, you might need extra paperwork or a longer track record.
If you’re not sure where you stand, a mortgage broker can help you crunch the numbers and spot any red flags.
Step 5: Get Your Paperwork in Order
Lenders love paperwork—payslips, bank statements, tax returns, ID, the lot. Make sure everything is up to date, accurate, and easy to read. Missing or messy paperwork is a common reason for rejection.
Step 6: Consider a Guarantor or Co-Borrower
If your deposit or income is a bit light, a family member might be able to help as a guarantor, or you could team up with a partner or friend. Just make sure everyone understands the risks and responsibilities.
Step 7: Shop Around for a Home Loan After Rejection (But Carefully)
Not all lenders are the same. Some are more flexible with first home buyers, low deposits, or non-standard income. A good mortgage broker can match you with the right lender and help you avoid unnecessary credit hits.
Step 8: Explore First Home Buyer Support Schemes
Check if you’re eligible for government grants, schemes, or deposit assistance. These can make a big difference to your borrowing power and approval chances.
Step 9: Give It Time
Sometimes, the best thing you can do is wait a few months, save a bit more, pay down some debt, and let your credit score recover. It’s frustrating, but it can make all the difference.
FAQs about Home Loan Rejection in Australia
Will a rejection hurt my credit score?
A single rejection won’t, but multiple applications in a short time can.
Can I reapply with the same lender?
Yes, but only after you’ve fixed the issue that caused the rejection.
Should I use a mortgage broker?
Absolutely. They know which lenders are more flexible and can help you put your best foot forward.
What if I keep getting rejected?
It might be time to rethink your budget, look at cheaper properties, or get some professional financial advice.
Final Thoughts
Getting knocked back for a home loan stings, but it’s not the end of your dream. With a bit of patience, some smart moves, and the right support, you can turn things around and get back on track.
If you’ve hit a wall with your home loan, don’t go it alone. Book a chat with Jordan at Mountway Finance for a no-judgement, no-obligation review of your situation. We’ll help you figure out your next steps and get you moving again.
