Home loan requirements every borrower needs to know

Navigating the lending criteria of Australian banks and mortgage insurers can feel complex, but you don’t have to go it alone. This is why mortgage brokers exist. We’re here to guide you through each requirement, help you gather the right information and identify lenders who are willing to consider your individual circumstances. With the right advice, you’ll know exactly where to focus and how to make your application stand out.

Here are some quick tips on navigating home loan requirements and how a broker can simplify the process.

Who can apply for a home loan

• Individuals over 18

• Companies

• Trustees on behalf of a trust (e.g. “Smith & Co Pty Ltd ATF The Smith Family Trust”)

• Combinations of the above

Who cannot apply

• Minors (under 18)

• Associations, clubs and limited liability companies

• Hybrid trusts (in most cases)

Special cases lenders may consider

• Borrowers of convenience: someone added for extra serviceability or security but they must have a genuine interest in the property (e.g. joint ownership or a de facto partner)

• Non-residents: temporary or permanent residents without citizenship can borrow up to 70% LVR (90% for NZ citizens living in NZ), provided they have net assets over $500,000 and, where required, FIRB approval

• Trust or company loans: all directors and shareholders usually must provide personal guarantees; trustee must be named exactly

When you might need a guarantor

• Guarantors fill in application details and may use their income to help you qualify

• Income verification and standard lending rules apply

• Pensioners cannot be guarantors on family pledge loans with owner-occupied security (varies by lender)

How much deposit you need

• Up to 90% LVR: no genuine savings required (some lenders still ask over 80%)

• 95% LVR: 5% genuine savings for home loans, 10% for investment loans

• Low-doc loans: 20% genuine savings

• No genuine-savings products exist with flexible LVRs (select lenders only)

Genuine savings can include:

• Cash in savings or term deposits held ≥ 3 months

• Equity in property

• Proceeds from property sale

• Shares held ≥ 3 months

• On-time rental history (3–12 months)

Non-genuine savings exclude proposed savings plans, FHOG, business funds, personal loans and asset sales (other than real estate).

Employment and income requirements

• Permanent or contract: ≥ 2 years in industry or ≥ 12 months with current employer

• Casual: ≥ 12 months (some lenders accept ≥ 3 months)

• Self-employed: ≥ 2 years trading; 12 months trading plus 2 years previous employment may be considered

• Second job: ≥ 12 months

Acceptable income

• Salary and wages (100%)

• Overtime if regular and confirmed (100%)

• Shift allowances if industry standard (100%)

• Rental income (80%, or 50% for inner-city apartments)

• Investment income and tax-deductible interest (80%)

• Government pensions deemed permanent (100%)

• Car allowances (100%)

• Fringe benefits and stipends (up to 80–100%)

Unacceptable income

• Workers compensation (apart from some exceptions)

• Boarder income (unless accepted by specialist lender)

• Any unlisted income sources

How lenders assess your ability to pay

• Net Disposable Income: surplus after tax, living expenses and commitments (minimum varies)

• Debt Service Ratio: percentage of gross income used for debt (loans over 50% DSR are generally declined)

• Repayments are stress-tested at the higher of the major banks’ average standard variable rate or the lender’s SVR, plus a 2.25% buffer (minimum assessment rate 7.25%)

Joint commitments and shared income with non-applicants are also fully factored into calculations.

What property you can use as security

• Must be readily saleable (high-demand location, good condition)

• Zoned for residential use (houses, townhouses, units, duplexes, vacant land)

• Minimum living area 50 m² (40 m² in high-demand metro)

• Power connected and direct vehicle access

• Freehold or acceptable leaseholds (varies by state)

High-risk security such as bushfire-affected land, large acreage, flood-prone sites, serviced apartments, display homes and unique properties are assessed case by case, often at lower LVRs.

How much you can borrow

• Maximum LVRs generally 95% (97% including capitalised LMI; 100% with a guarantor)

• Preferred loan caps:

  • 95% LVR: $750,000

  • 90% LVR: $850,000

  • 80% LVR: $1,000,000

  • 70% LVR: $2,000,000

  • 60% LVR: $2,500,000

• Exposure limit: $2.5 million per borrower or group (higher on case by case basis)

Other loan types to consider

• Investment loans: up to 95% LVR; genuine savings and clear credit required; 50% rental income accepted in some cases

• Debt consolidation: up to 90% LVR; max four debts; six-month clean repayment history

• Home renovation or construction loans: up to 95% LVR on completion valuation; progress payments and registered valuer reports required

• Interest only loans: standard up to five years; longer periods and higher LVRs assessed individually

Get expert help

Navigating lender policies and maximising your borrowing power can be complex. Our mortgage brokers know the ins and outs of every major bank and insurer. Contact us today to find the right lender for your situation.