Home Loan Eligibility in Australia

Share This Post

Key Takeaways

Key Point Description
Personal Profile
Applicants must be above 18 years old to apply for a home loan. Although there isn't necessarily an upper age limit, mature applicants must be able to demonstrate their ability to repay the loan, especially when nearing retirement age. Applicants must also be Australian citizens or permanent residents.
Income and Employment
Borrowers will need to prove their source of income (primary, secondary, and others) and show that they have stable employment in order to get approved for a home loan. The type and longevity of employment will also matter in the eyes of lenders.
Credit Score and History
The borrower’s credit score and history are some of the primary criteria lenders look at. Lenders typically look for a good credit score and a healthy credit history to ensure that the borrower has a pattern of good financial management and debt repayment.
Property Details
Lenders will consider several factors about your chosen property as part of their approval process. They will appraise the value of the property and consider its location, age, type, and state before approving the loan.
Most lenders require borrowers to pay an upfront deposit of anywhere from 5% to 20% of the property value. However, it’s advisable to pay at least 20% to avoid paying for Lenders’ Mortgage Insurance.
Debt-to-Income Ratio
Your debt-to-income ratio measures your total debt against your gross income. Lenders look for a lower ratio, which means less of your income goes into debt repayments.
Loan-to-Value Ratio
The loan-to-value ratio is how much your mortgage is compared to the appraised value of the property. Lenders look for a lower LVR, which can be achieved by paying a larger deposit.
Existing Debts and Liabilities
Lenders will look at your existing debts, including credit cards, car loans, and existing mortgages when assessing your application. They need to ensure that you can pay off all loans including the one you are currently applying for with your income.
Tips to Improve Home Loan Eligibility
Sound financial management is the key to improving your home loan eligibility. This includes saving for a larger deposit, improving your credit score, stabilising employment, and overall managing your finances effectively.

Many aim to be homeowners, and home loans make that goal possible without having to pay the whole property amount upfront. Home loan eligibility criteria can vary between lenders, but there are several basic requirements that most lenders will consider when assessing an application. Understanding these criteria can help you gauge your readiness to apply for a home loan. 

Get a free property valuation

Basic Home Loan Eligibility Criteria

Personal Profile

You must be at least 18 years old to enter into a loan agreement in Australia. However, lenders may also consider age if you’re older, especially if you’re near retirement age. Although there’s technically no age limit when applying for a mortgage, you will need to prove to lenders that you can successfully pay off the loan within a reasonable timeline. For instance, if you’re around 50 to 60 years old, you may not be eligible for a 30-year loan term.

Home loan applicants also typically need to be Australian citizens or permanent residents. Some lenders may offer loans to non-residents, but the conditions might be stricter.

Income and Employment

Lenders will assess your ability to repay the loan by looking at your income and employment stability. You’ll need to provide evidence of steady employment, which could include pay slips, tax returns, and employment contracts. Self-employed, contractual, and casual applicants will need to provide additional documentation to prove their income stability. Lenders will also look at other streams of income, such as second jobs and rental income, when assessing your loan serviceability. 

Credit Score and History

Your credit score and borrowing history play a crucial role in the lender’s decision. A good credit score indicates to lenders that you’re a lower-risk borrower. It demonstrates that you manage your debts responsibly by only taking on debt you can realistically pay and making repayments regularly. Borrowers with high credit scores can enjoy low interest rates and better loan conditions. Meanwhile, those with lower scores may need to seek loans from non-bank lenders and pay higher interest rates.

Property Details

The property you intend to purchase will be appraised to ensure it provides adequate security for the loan amount. Lenders will also consider the location, property type, age of the property, size, and state of the property. Lenders prefer properties that are easier to sell in the case of default. These homes are usually in suburbs or cities, brand new, or with minimal damage. If the property requires significant renovations, the lender will take into account the potential expense and assess whether you can realistically pay for both the mortgage and the refurbishments.


Most lenders require you to have a deposit, usually at least 20% of the property’s value. Many lenders allow deposits as low as 5% to 10%, but borrowers must pay for Lenders Mortgage Insurance (LMI. Having a larger deposit can improve your chances of loan approval and will usually secure you a better interest rate. 

Debt-to-Income Ratio (DTI)

Your DTI ratio is a measure of your total monthly debts (including the prospective mortgage payment) against your gross monthly income. Lenders use this to assess your ability to manage and repay your loan. Lenders prefer a lower DTI ratio, which means you can comfortably pay your debts while still affording your regular expenses.  

Loan-to-Value Ratio (LVR)

LVR is the amount of your loan compared to the appraised value of the property you’re buying. Loans with an LVR over 80% typically are looked upon less favourably as lenders see a higher chance of default. If the LVR ratio is high, borrowers can still get approved; however, they may have to pay higher interest rates and additional mortgage insurance to protect the lender.

Existing Debts and Liabilities

Your current debts, including credit cards, personal loans, and car loans, will be considered. Lenders will evaluate whether you can manage these existing debts along with the new home loan repayments.

Tips to Improve Your Home Loan Eligibility

  • Improve Your Credit Score. 
    • Check your credit report. Consistently make payments on time, pay down existing debt, and avoid applying for new credit lines before your home loan application to improve your credit score.


  • Save for a Larger Deposit.
    • The more you can save for a deposit, the lower your Loan-to-Value Ratio (LVR) will be. This reduces the risk for the lender and can help you avoid paying Lenders’ Mortgage Insurance, which is typically required if your LVR is above 80%.


  • Your Employment. 
    • Lenders look for stable and reliable income when assessing loan applications. Having a steady job for at least 6-12 months before applying can improve your eligibility. If you’re self-employed, ensure your business financials show consistent income over the last two years. Lenders may look at your employment more favourably if you stay with the same employer or within the same industry for a long time.


  • Lower Your Debt-to-Income Ratio.
    • Pay down existing debts such as credit cards, personal loans, and car loans. Avoid taking new loans, especially high-interest ones, before your mortgage application. A lower DTI ratio shows lenders that you have more disposable income to afford mortgage repayments.


  • Minimise Your Expenses.
    • Lenders will review your living expenses to determine how much you can afford to borrow. Reducing non-essential spending in the months leading up to your application can help demonstrate financial discipline and increase your borrowing power.


  • Consider a Joint Application.
    • Applying for a home loan with a partner or spouse can combine your income, potentially increasing the amount you’re eligible to borrow. However, keep in mind that both applicants’ credit histories will be considered.
  • Choose a Property Wisely. 
    • The property you intend to purchase can affect your loan eligibility. Lenders may have restrictions on certain types of properties or locations. Choosing a property that fits within mainstream lending criteria can help with approval.


  • Prepare Documentation in Advance.
    • Having all the required documentation ready, including proof of income, employment verification, and personal identification, can streamline the application process.


  • Consult a Loan Expert. 
    • Qualified loan experts like Dark Horse Financial can offer valuable advice on how to improve your home loan eligibility. They can also help you find lenders suited to your financial situation and assist with the application process.

Find Out if You’re Eligible for a Home Loan

Are you in the process of applying for a home loan? Although many lenders follow more or less the same eligibility criteria, it’s still possible to find other solutions for your financial situation. Talk to us and we’ll help guide you to lenders and loans for your specific needs. With our client-for-life approach, we’ll help you every step of the way, from our first meeting and even after loan approval.  

More To Explore

Financial chart drawn over hands taking notes background. Concept of statistics. Multi exposure

Lending Indicators May 2024 Report

Key Takeaways   Housing market shows overall strength despite month-to-month volatility Slight cooling in new loan commitments may reflect economic

Learn more about business financing!

drop us a line and keep in touch

Two men discuss the Types of Loans for Businesses with Bad Credit, Conceptual Photo
Scroll to Top