How to get a home loan in Australia (Step By Step Guide)
How to Get a Home Loan in Australia (Step-by-Step Guide)
Learn how to get a home loan in Australia with a clear, borrower-friendly roadmap. From deposit planning and borrowing power to pre-approval, documents, valuation, and settlement — here’s how to move forward with confidence.
If you’re Googling how to get a home loan in Australia, you’re not alone — and the process can feel confusing at first. The good news is that once you understand the steps lenders look for — income, deposit, expenses, credit history, and the property — it becomes much easier to plan and get approved.
In this guide, we’ll walk through a clear, broker-style roadmap to getting a mortgage in Australia — whether you’re a first home buyer in Sydney, refinancing, investing, or self-employed.
Step 1: Get clear on your goal and timeline
Before you apply, decide what you’re actually trying to achieve. This sounds basic, but it affects everything from the loan type to the lender choice.
Common home loan goals
- Buying your first home to live in
- Upgrading or purchasing your next home
- Refinancing to a better rate or improved loan features
- Buying an investment property
- Accessing equity for renovations or another purchase
Timeline matters
- Buying in the next 1–3 months: pre-approval should be your priority
- Buying in 3–12 months: focus on deposit growth and borrowing power improvements
- Not sure yet: create a plan now so you can move quickly when the right property appears
Step 2: Work out your deposit and true upfront costs
Most people focus only on the deposit, but lenders and buyers should think in terms of total cash needed to complete.
How much deposit do you need?
In Australia, a 20% deposit is often seen as the gold standard because it can help you avoid Lenders Mortgage Insurance (LMI). But it’s not the only option.
- 20% deposit — often avoids LMI
- 10% deposit — LMI usually applies
- 5% deposit — possible for eligible borrowers depending on lender policy and scheme access
Don’t forget these upfront costs
- Stamp duty, depending on your state and any concessions
- Conveyancing or solicitor fees
- Building and pest inspection costs
- Lender fees, depending on the product
- LMI, if applicable
Sarah and Tom had $55,000 saved and were aiming for a $750,000 apartment in Sydney. They assumed they had enough deposit, but once stamp duty concessions, legal fees, and cash buffers were mapped out, they realised they needed either a tighter purchase price range or a smarter strategy to buy with a smaller deposit while preserving some savings.
Step 3: Understand your borrowing power
Borrowing power is the maximum amount a lender may allow you to borrow based on your income, expenses, debts, dependants, and assessment buffers.
What lenders look at
- Your income — base salary, allowances, overtime, or bonuses if consistent
- Your living expenses — both declared expenses and benchmark checks
- Existing debts — credit cards, car loans, personal loans, and HECS/HELP
- Dependants and household commitments
- Interest rate buffers used for serviceability testing
Quick ways to improve borrowing power
- Reduce credit card limits, even if the cards are not used
- Pay down personal loans or car finance where possible
- Keep spending stable before applying
- Make sure income is documented cleanly and clearly
This is where many borrowers get surprised. Checking borrowing power early gives you a more realistic budget and can prevent wasted inspections and rejected applications.
Step 4: Choose the right loan type and features
A home loan is not just about the rate. The right loan structure can save you money, preserve flexibility, and reduce stress over time.
Common loan types
- Variable rate — more flexibility for extra repayments and easier refinancing
- Fixed rate — repayment certainty for a set term
- Split loan — part fixed and part variable for a balance of certainty and flexibility
Features that can matter
- Offset account to reduce interest while keeping funds accessible
- Redraw facility
- Extra repayments without penalties, especially on variable loans
- Flexibility to refinance later if better options become available
Step 5: Get pre-approval
Pre-approval is when a lender assesses your situation and provides an in-principle approval amount before you buy.
Why pre-approval helps
- You can shop with more confidence
- It can speed things up once you find a property
- It reduces the risk of making offers outside your finance range
What pre-approval is not
- It is not a guarantee — final approval still depends on the property and updated checks
- It can expire — often after 3 to 6 months depending on the lender
Step 6: Gather the right documents
A clean application is usually a faster application. The easier it is for the lender to verify your position, the smoother the process tends to be.
For PAYG employees
- Recent payslips
- Employment details
- Bank statements, often 3 to 6 months
- ID documents
For self-employed borrowers
- Tax returns and notices of assessment, usually 2 years
- Business financials
- BAS, where required
- Accountant letter, where required
If you’re self-employed, lender selection matters even more because different lenders assess business income differently.
Step 7: Submit the application and stay responsive
Once the application is submitted, the lender may ask questions or request extra documents. Responding quickly helps keep momentum.
- Reply quickly to any lender or broker requests
- Avoid opening new debts during the application period
- Keep your accounts stable and avoid unexplained transfers where possible
Step 8: Property valuation and formal approval
After you sign a contract, or once a property is selected, the lender usually orders a valuation.
What can impact valuation
- Comparable sales in the area
- Property type, including apartments or unique properties
- Condition, demand, and market sentiment
If the valuation comes in lower than expected, you may need:
- A larger deposit
- A different lender
- A revised purchase price or strategy
Step 9: Settlement and what happens next
Once formally approved, your conveyancer or solicitor and the lender coordinate settlement. After that, your loan starts and good loan management becomes important.
- Set repayments to align with your pay cycle
- Use offset or redraw strategically
- Review your loan regularly because rates and lender policies change
Quick checklist: Getting a home loan in Australia
Need a clear plan before you apply?
Loans AU can help you compare options across 100+ lenders, structure the loan properly, and map out a more realistic path forward based on your situation.
Frequently Asked Questions
Below are common questions borrowers ask when planning a home loan in Australia.
How long does it take to get a home loan approved in Australia?
Can I get a home loan with a 5% deposit?
What credit score do you need for a home loan?
Is it better to go to a bank or a mortgage broker?
What’s the biggest mistake first home buyers make?
Can I refinance later if I take a loan now?
Conclusion
Getting a mortgage in Australia does not have to feel overwhelming. If you follow the core steps — deposit planning, borrowing power checks, the right loan structure, and a clean application — you put yourself in a much stronger position to get approved and buy with confidence.
If you’d like help mapping out your borrowing power and comparing options across 100+ lenders, Loans AU is here to make the process simpler.
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