---
title: Why Your Home Loan Was Declined and What To Do Next | GNT Finance
description: The real reasons lenders decline home loans, seen from the credit officer's desk, and the steps Melbourne borrowers can take to get approved next time.
url: https://gntfinance.com.au/blog/why-your-home-loan-was-declined-and-what-to-do-next/
author: Gorakh Timilsina
published: 2026-09-06
category: Loan basics
---

# Why your home loan was declined, and what to do next: a former credit officer's view

**In short:** Home loans are declined for a small number of recurring reasons: the numbers do not service at the assessment rate, the credit file has something the lender's policy will not accept, the deposit is not genuine savings, the valuation comes in short, or the income or property type falls outside that lender's policy. Most declines are fixable, and many are simply the wrong lender for the file.

Before founding GNT Finance, Gorakh Timilsina spent years as a senior credit officer, which means he was the person on the other side of the desk deciding whether your application was approved. That experience shapes how we work now. A decline is rarely a verdict on you as a person. It is a mismatch between a file and a policy, and once you understand which part mismatched, the way forward is usually clear.

## Key takeaways

- A credit officer works to a written policy. If your file fails a policy rule, it is declined no matter how good the rest looks.
- Serviceability, credit history, deposit source, valuation and policy fit account for nearly all declines.
- A decline with one lender does not mean a decline everywhere; lender policies differ widely.
- Do not fire off new applications. Each one adds an enquiry to your credit file.
- Ask for the specific reason in writing, fix the cause, then reapply with the right lender.

## How a credit officer actually reads your file

An assessor is not looking for reasons to say yes. They are checking your application against policy, line by line, and looking for anything that does not reconcile. Payslips are compared to bank credits. Declared expenses are compared to statement spending. The credit report is checked against declared liabilities. The valuation is checked against the contract. If everything reconciles and the numbers service, it is approved. If anything does not, it is queried, and if the query cannot be resolved, it is declined.

## The six reasons loans get declined

| Reason | What the assessor saw | Typical fix |
|---|---|---|
| Serviceability | Surplus at the assessment rate is negative or too thin | Reduce debts and card limits, choose a lender with a more generous expense model, lower the loan |
| Credit file | Defaults, late payments, too many enquiries, or an undeclared debt | Wait for entries to age, correct errors, apply to a lender whose policy accepts the history |
| Deposit source | Funds not held long enough, or not genuine savings | Hold funds for three months, document the gift, use the Guarantee or a guarantor |
| Valuation shortfall | Valuer's figure below contract price | Renegotiate, add cash, contest the valuation, or try a lender with a different valuer panel |
| Employment or income | Probation, casual under 12 months, self-employed with thin financials | Wait out probation, use a lender that accepts shorter histories or alternative documents |
| Property or policy | Small apartment, high-density postcode, unusual title, loan purpose outside policy | Different lender, or a different property |

### 1. Serviceability

The most common decline. Lenders assess repayments at your rate plus 3 percentage points, apply a minimum living expense benchmark, and count credit card limits at a percentage of the limit whether or not you use them. If your surplus is negative, the answer is no. The fix is arithmetic: close cards, pay out small loans, add a co-borrower, or reduce the loan. Our [borrowing power guide](/guides/how-to-improve-borrowing-power/) lists the levers and the [borrowing power calculator](/calculators/borrowing-power/) lets you test them.

A subtle version: your file services with one lender and not another, because they treat overtime, bonus or rental income differently. That is not a decline to be fixed. That is a lender to be swapped.

### 2. Credit history

A single paid default from four years ago may be acceptable; an unpaid telco default from last year usually is not. Many enquiries in a short period suggest you have been shopping for credit. An undeclared debt that appears on the report is worse than the debt itself, because it raises the question of what else was left out. Get your report before you apply, and read [credit scores and home loans](/guides/credit-score-and-home-loans/) for how lenders interpret it.

### 3. Deposit not genuine

Lenders generally want 5% of the purchase price as genuine savings held for three months. A $60,000 balance that appeared in one transfer last month, with no history, is a query. If it came from parents, a gift letter and the giver's bank statement usually resolve it. If it came from selling a car or a tax refund, documentation resolves it. If it cannot be documented, the assessor cannot accept it. [Genuine savings explained](/guides/genuine-savings-explained/) covers what counts.

### 4. Valuation shortfall

You agreed to pay $680,000 for a house in [Epping](/mortgage-broker/epping/); the valuer says it is worth $650,000. The lender lends against $650,000. If you were at 90% LVR, your loan falls from $612,000 to $585,000 and you need to find $27,000 more, or the application fails on LVR. Options include a second valuation with another lender, negotiating the price down using the valuation, or a guarantor. If the contract is subject to finance, the [subject-to-finance clause](/legal/subject-to-finance-clause/) lets you withdraw; if it is not, read [what happens if finance falls through](/legal/what-happens-if-finance-falls-through/) urgently.

### 5. Employment and income

Probation is a common trip-wire. Some lenders will not lend to anyone on probation; others will with a strong history in the same field. Casual employees often need 6 to 12 months in the role. Self-employed borrowers may be declined because the latest tax return is missing or because add-backs were not explained. The [self-employed home loan guide](/guides/self-employed-home-loan-guide/), [low doc loans explained](/guides/low-doc-loans-explained/) and our [self-employed loans](/services/self-employed-loans/) page show the alternatives.

### 6. Property and policy

Every lender has a list of what it will not lend on: small apartments, certain postcodes at high LVR, non-standard titles, or loan purposes it does not fund. This is about the security, not you. The fix is a different lender or, occasionally, a different property.

## What to do in the week after a decline

1. **Get the reason in writing.** Lenders must tell you the reason for declining if you ask. "Does not meet policy" is not a reason; ask which policy.
2. **Do not reapply anywhere yet.** Every application creates a credit enquiry, and three declines in a month make the fourth harder.
3. **Pull your own credit report.** [MoneySmart explains how to get it free](https://moneysmart.gov.au/managing-debt/credit-scores-and-credit-reports). Compare it with what you declared. Any surprise is your first fix.
4. **Fix what is fixable.** Close cards, document the deposit, wait out probation, get the missing tax return lodged.
5. **Match the file to a lender.** We know which lenders accept a paid default, which shade casual income least, which have generous expense models, and which valuer panels tend to be conservative in new estates. Read [mortgage broker vs bank](/guides/mortgage-broker-vs-bank/) for how that differs from walking into a branch.
6. **If the decline was unfair, complain.** Lenders have internal dispute resolution and you can escalate to the [Australian Financial Complaints Authority](https://www.afca.org.au/), the external dispute resolution scheme. Declines based on policy are rarely overturned, but errors in assessment sometimes are.

## Declined after pre-approval

Pre-approval is conditional; the formal assessment adds the valuation, updated documents and a fresh credit check. The usual culprits are a valuation shortfall, a new debt taken on since pre-approval, a job change, or spending on statements that does not match the declared expenses. If a private-sale subject-to-finance clause is still live you can withdraw; at auction there is no such protection, as the [auction finance checklist](/blog/auction-finance-checklist-victoria/) explains.

## Frequently asked questions

### Does a declined home loan affect my credit score?

The decline itself is not recorded, but the application enquiry is, and multiple enquiries in a short period lower your score and worry the next assessor. That is why the advice after a decline is to pause, fix, then apply once with the right lender rather than trying three banks in a week.

### Can I apply with a different lender straight away?

You can, but you should not until you know why you were declined. If the reason was serviceability or credit history, the next lender will likely see the same thing. If the reason was policy fit (probation, property type, income treatment), a different lender may approve the same file without changes. A broker can tell you which situation you are in.

### How long should I wait to reapply?

It depends on the cause. A documentation problem can be fixed in days. Probation may need three to six months. A default needs to be paid and, for some lenders, aged 12 months or more. Ask for a specific timeline rather than a general waiting period.

### Is it better to go through a broker after a decline?

Usually, yes. Brokers see lender policies side by side and owe you a [best interests duty](/legal/best-interests-duty-mortgage-brokers/) under the National Consumer Credit Protection Act. The value after a decline is knowing which lender's policy fits the file you actually have, rather than guessing.

## Talk to GNT Finance

If you have been declined, bring us the letter and your documents and we will tell you straight what caused it and whether it can be fixed, in English, Nepali or Hindi. [Book a free consultation](/contact/) or call Gorakh Timilsina on 0426 403 703. There is no cost to you for our home-loan service in most cases.