Your Mortgage Application Questions Answered
- Most mortgage application questions have clear, direct answers — uncertainty about the process is one of the most common reasons first home buyers delay
- Pre-approval takes 3-10 business days for a complete application; unconditional approval after finding a property typically takes 5-10 business days
- A formal application creates one credit enquiry — working through a broker means one enquiry, not multiple
- Self-employed borrowers need 2 years of tax returns; the application process takes the same path but with additional documentation
- Lenders assess your expenses using HEM benchmarks — your actual declared expenses matter, but so does the minimum benchmark the lender applies
- If declined, ask for the specific reason — a decline from one lender does not mean you cannot borrow elsewhere
The Most Commonly Asked Mortgage Application Questions
How long does a mortgage application take?
The timeline has three phases:
Pre-approval: 3-10 business days from a complete application. Straightforward PAYG applications with all documents ready often return in 3-5 days. Self-employed or complex income situations take longer.
Unconditional approval (after finding a property): 5-10 business days, which includes a property valuation (usually 2-5 days) and final verification.
Settlement: As specified in your contract — typically 30-60 days for established properties.
Total from first consultation to settlement for a first home buyer: 6-14 weeks on average.
What documents do I need?
For PAYG employees:
- Last 2 payslips
- Most recent tax return (if available)
- Last 3-6 months of bank statements for all accounts
- Government-issued photo ID
- Details of all existing loans, credit cards, and debts
For self-employed borrowers:
- Last 2 years of personal tax returns
- Last 2 years of business financial statements (profit & loss, balance sheet)
- Last 3-6 months of business and personal bank statements
- ATO notice of assessment for both years
Have everything ready before your broker submits. Incomplete applications are the single biggest cause of delays.
How much can I borrow?
Your borrowing capacity is determined by the lender's serviceability assessment — not just a multiple of your income. Key factors are:
- Your gross income (and how it's earned — PAYG, self-employed, rental income each treated differently)
- Your existing liabilities (loans, credit card limits, HECS debt)
- Your living expenses (benchmarked against HEM — the lender's minimum)
- Your dependants
- The APRA 3% serviceability buffer (assessed at your actual rate + 3%)
As a rough guide, most lenders will consider a loan of 5-7x your gross annual income, subject to the above. A broker can calculate your exact capacity across different lenders — they vary by 10-20% for the same applicant. Contact Luke Drake for a borrowing capacity assessment.
Does applying affect my credit score?
Yes — a formal application creates a hard enquiry on your credit file, which can temporarily reduce your score by a small amount (typically 5-10 points). The impact is minor and short-term.
The more important principle: multiple applications in a short period leave multiple enquiries. Three applications to three different banks in one month looks like credit desperation to subsequent lenders. Work through a single broker who submits to one lender at a time.
Can I apply if I'm self-employed?
Yes — self-employed borrowers can absolutely get home loans. The assessment uses your last 2 years of tax returns, and lenders typically use the lower of the two years' income (or the average). The key challenge for self-employed applicants is that tax minimisation — entirely legitimate — can reduce the income figure lenders use for serviceability.
If your tax-effective income is materially lower than your actual cash flow, a low-doc loan through a specialist lender may be appropriate. A broker who regularly places self-employed applicants knows which lenders' policies are most favourable for your income structure.
What if I've been declined before?
A decline from one lender doesn't mean you can't borrow. Common reasons for decline and what to do:
Serviceability: Your income doesn't support the loan size at that lender's assessment rate. Solutions: different lender (policies vary by 10-20%), reduce loan amount, pay down other liabilities, close unused credit cards.
Credit file issues: A missed payment, default, or too many recent enquiries. Solutions: check your file, dispute errors, wait for the issue to age, or work with a specialist credit lender.
LVR or deposit: You don't have enough deposit for that lender's threshold. Solutions: government guarantee schemes, guarantor, or increase savings.
Property type: The lender doesn't accept that property type (high-density apartment, certain postcodes). Solutions: different lender with broader property acceptance criteria.
Always ask for the specific reason for a decline. You are entitled to know.
Do I need a bigger deposit to improve my chances?
A larger deposit (lower LVR) improves both your approval likelihood and your rate. The key thresholds:
- Below 80% LVR: No LMI. Access to best rate tiers.
- 80-90% LVR: LMI applies. Rates may be higher.
- 90-95% LVR: LMI applies at significant cost. Narrower lender selection.
- 5% deposit with First Home Guarantee: No LMI (government guarantee). Available to eligible first home buyers.
Can I borrow with a co-applicant (joint application)?
Yes — joint applications are common for couples and can increase combined borrowing capacity. Both applicants' incomes are counted; both applicants' liabilities, credit files, and expenses are also assessed. A poor credit record from one applicant affects the application. Discuss the implications with your broker if you have concerns about one applicant's financial history.
What happens after my application is approved?
Once you receive unconditional approval:
- Your lender issues formal loan documents
- Your solicitor/conveyancer reviews and you sign the documents
- Documents are returned to the lender
- Settlement is coordinated between your solicitor, the vendor's solicitor, and the lender
- On settlement day, the loan funds are transferred and ownership changes
Frequently Asked Questions
Can I make changes to my loan after approval but before settlement?
Minor changes (adjusting repayment frequency, adding an offset account) are usually possible. Major changes (increasing the loan amount, adding a co-borrower) require a new application and assessment.
What if my financial situation changes between application and settlement?
Notify your broker immediately. Lenders reassess if they become aware of material changes. A new job, new debt, or reduced income between pre-approval and final approval can affect the outcome.
Written by Luke Drake | Authorised Credit Representative (CRN: 565112) | Frontier Finance Co