Got a good credit score but your loan was declined? Discover the real reasons WA lenders reject home loan applications — and what to do next for approval success.

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Snapshot: The Hidden Side of Loan Approvals

When Sarah Nguyen from Canning Vale applied for her first home loan, she felt confident. Her credit score was “excellent,” she had a stable job in HR, and a solid savings history.

So when the lender said “application declined,” she was stunned.

Like many WA borrowers, Sarah assumed her credit score was the main approval factor — but lenders actually assess far more than just your credit file.

If you’ve been declined despite doing everything “right,” you’re not alone. Let’s unpack the real reasons lenders in WA reject home loan applications, even for financially responsible borrowers, and how to fix those issues before you try again.

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A Good Credit Score Isn’t Everything

Your credit score is important — it shows lenders you manage debt responsibly — but it’s only one part of your overall profile.

In Australia, lenders use what’s called a serviceability assessment, where they test how comfortably you could afford repayments under higher interest rates. Even with perfect credit, you can still be declined if your overall financial picture doesn’t meet that test.

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Your Income-to-Debt Ratio Doesn’t Stack Up

Even with strong income, lenders calculate your debt-to-income (DTI) ratio — the amount you owe compared to how much you earn.

In WA, most lenders cap DTI around 6 times your annual income.
So if your household earns $100,000, total debts (including proposed home loan) generally shouldn’t exceed $600,000.

WA Example:

Sarah and her husband earn a combined $120,000, but they already have a car loan and two credit cards totalling $40,000. That pushes their DTI higher than some banks allow — even though their credit scores are excellent.

Fix It:

• Reduce credit card limits or personal debts before reapplying.

• Consider a non-bank or specialist lender who accepts higher DTIs for strong-income borrowers.

Your Expenses Are Higher Than You Think

Lenders in WA use Household Expenditure Measures (HEM) to estimate living costs. If your declared expenses seem too low or too high compared to the benchmark, it can trigger red flags.

They’ll review:

• Childcare and school fees

• Groceries and utilities

• Insurance and transport

• Discretionary spending

WA Context:
Many Perth families underestimate costs like commuting distances or daycare fees, which can quickly impact serviceability.

Fix It:

• Review your real spending for 3–6 months.

• Cut back discretionary expenses before applying.

• Provide consistent, realistic figures — honesty builds lender trust.

Insufficient Genuine Savings or Deposit

Even with a good credit score, lenders may reject your application if your deposit doesn’t meet “genuine savings” requirements.

Most WA lenders want to see at least 5% genuine savings, held for 3 months or more — meaning funds you’ve personally saved (not gifted or borrowed).

Example:
Sarah’s $40,000 deposit included $15,000 from her parents. The bank didn’t count that portion as genuine savings because it hadn’t been held long enough.

Fix It:

• Keep any gifted funds in your account for 3+ months to “season” them.

• Continue making small, regular savings deposits — it shows consistency.

• Some lenders (like Keystart WA) may accept rent history instead of genuine savings.

Your Serviceability Score Falls Short

Every lender runs your financials through a serviceability calculator. This tests whether you could handle repayments if rates rose by around 3% above today’s rate (per APRA buffer rules).

Even if your current budget works, the “stressed” scenario might not pass.

Fix It:

• Reduce liabilities before applying.

• Choose a slightly lower loan amount or property price.

• Ask your broker to test multiple lender calculators — each bank’s formula differs.

Employment History or Income Type Isn’t Stable Enough

Lenders like consistency.
If you’ve recently changed jobs, are on probation, or rely on casual or contract income, it can raise risk concerns — even if your overall earnings are solid.

WA Example:
Many Perth borrowers in industries like mining, healthcare, or construction have variable shifts or FIFO arrangements. Some banks average this income over 6–12 months, which can reduce assessed income.

Fix It:

• Wait until you’ve passed probation before applying.

• Provide at least 6–12 months of payslips or tax returns if self-employed.

• Ask your broker which lenders accept variable or contract income types.

Too Many Recent Credit Enquiries

Each time you apply for credit — home loan, car loan, or even a credit card — it leaves a mark on your report.
Multiple recent applications can make lenders think you’re financially stretched or “shopping around.”

Fix It:

• Avoid applying with multiple banks at once.

• Use a broker to assess your situation first — they can check your eligibility without impacting your score.

• If you’ve had recent declines, wait at least 3–6 months before reapplying.

Property or Valuation Issues

Sometimes the issue isn’t you — it’s the property.

In WA, lenders might reject a loan if:

• The property value doesn’t match the purchase price.

• It’s too small (e.g., under 40m² for apartments).

• It’s in a postcode or development deemed “high risk.”

Fix It:

• Order an independent valuation early.

• Work with a broker who knows which WA postcodes certain lenders restrict.

 You Applied With the Wrong Lender Type

Not all lenders use the same approval criteria.
For example:

• Major banks apply stricter DTI limits and genuine savings rules.

• Credit unions or non-banks may allow higher DTIs or consider rental history.

• Keystart WA focuses on income thresholds and affordability for first-home buyers.

A “no” from one lender doesn’t mean you can’t qualify elsewhere.

Fix It:

• Have your situation reviewed by a local mortgage broker who knows each lender’s policy.

• Ask for a “pre-assessment” before applying formally.

What to Do After a Loan Rejection

If your application has been declined, don’t panic. Follow these steps:

1. Ask for the reason in writing.
   Lenders must tell you why you were declined.

2. Check your credit report.
   Ensure no errors or duplicate enquiries.

3. Review your finances with a broker.
   A WA-based broker can assess your DTI, savings, and serviceability.

4. Wait and improve key areas.
   Often, a few months of focused preparation leads to approval.

Quick Recap: Why Good Credit Isn’t Always Enough

Final Takeaway: Approval Is About the Full Picture

A “good” credit score is a great foundation — but lenders look at the whole story, not just one number.

In WA, the most successful borrowers prove:

• Steady income

• Reasonable spending

• Genuine savings

• Low overall debt

Next Step:
Before reapplying, speak with a local WA mortgage broker who can review your full financial profile and match you with a lender that fits your situation — saving time, stress, and another “declined” email.

Disclaimer

The information in this article is general in nature and does not constitute financial advice. You should consider your own circumstances and seek professional guidance before making financial decisions.